Exhibit
2.1










PURCHASE
AND SALE AGREEMENT




BY
AND AMONG




MERIT
MANAGEMENT PARTNERS I, L.P., MERIT MANAGEMENT PARTNERS II, L.P., MERIT
MANAGEMENT PARTNERS III, L.P., MERIT ENERGY PARTNERS III, L.P., MERIT ENERGY
PARTNERS D-III, L.P., MERIT ENERGY PARTNERS E-III, L.P. and MERIT ENERGY
PARTNERS F-III, L.P.




AS
SELLER




AND




LINN
ENERGY HOLDINGS, LLC




AS
PURCHASER




Executed
on November 25, 2009













TABLE
OF CONTENTS




ARTICLE
      1
            PURCHASE
      AND SALE
            1Section
      1.1
            Purchase
      and Sale
            1Section
      1.2
            Assets
            1Section
      1.3
            Excluded
      Assets
            3Section
      1.4
            Effective
      Time; Proration of Costs and Revenues
            4Section
      1.5
            Delivery
      and Maintenance of Records
            5ARTICLE
      2
            PURCHASE
      PRICE
            5Section
      2.1
            Purchase
      Price
            6Section
      2.2
            Adjustments
      to Purchase Price
            6Section
      2.3
            Deposit
            8Section
      2.4
            Allocation
      of Purchase Price
            8ARTICLE
      3
            TITLE
      MATTERS
            8Section
      3.1
            Seller’s
      Title
            8Section
      3.2
            Definition
      of Defensible Title
            8Section
      3.3
            Definition
      of Permitted Encumbrances
            10Section
      3.4
            Notice
      of Title Defect Adjustments
            11Section
      3.5
            Casualty
      or Condemnation Loss
            16Section
      3.6
            Limitations
      on Applicability
            17ARTICLE
      4
            ENVIRONMENTAL
      MATTERS
            17Section
      4.1
            Assessment
            18Section
      4.2
            NORM,
      Wastes and Other Substances
            19Section
      4.3
            Environmental
      Defects
            20Section
      4.4
            Inspection
      Indemnity
            21Section
      4.5
            Exclusive
      Remedy
            21ARTICLE
      5
            REPRESENTATIONS
      AND WARRANTIES OF SELLER
            21Section
      5.1
            Generally
            21Section
      5.2
            Existence
      and Qualification
            22Section
      5.3
            Power
            22Section
      5.4
            Authorization
      and Enforceability
            22Section
      5.5
            No
      Conflicts
            22Section
      5.6
            Liability
      for Brokers’ Fees
            23Section
      5.7
            Litigation
            23Section
      5.8
            Taxes
      and Assessments
            23Section
      5.9
            Compliance
      with Laws
            24Section
      5.10
            Contracts
            24





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Section
      5.11
            Payments
      for Hydrocarbon Production
            24Section
      5.12
            Governmental
      Authorizations
            24Section
      5.13
            Outstanding
      Capital Commitments
            25Section
      5.14
            Imbalances
            25Section
      5.15
            Condemnation
            25Section
      5.16
            Bankruptcy
            25Section
      5.17
            Affiliated
      Contracts
            25Section
      5.18
            Foreign
      Person
            25Section
      5.19
            Seller
      Affiliate Obligations
            25Section
      5.20
            Abandoned
      Wells
            26Section
      5.21
            Accuracy
      of Information
            26Section
      5.22
            Payout
      Balances
            26Section
      5.23
            Operations
            26ARTICLE
      6
            REPRESENTATIONS
      AND WARRANTIES OF PURCHASER
            26Section
      6.1
            Existence
      and Qualification
            26Section
      6.2
            Power
            27Section
      6.3
            Authorization
      and Enforceability
            27Section
      6.4
            No
      Conflicts
            27Section
      6.5
            Liability
      for Brokers’ Fees
            27Section
      6.6
            Litigation
            27Section
      6.7
            Financing
            27Section
      6.8
            Limitation
            28Section
      6.9
            SEC
      Disclosure
            28Section
      6.10
            Bankruptcy
            28Section
      6.11
            Qualification
            28Section
      6.12
            Knowledge
      of Title Defects and Environmental Defects
            28Section
      6.13
            Independent
      Evaluation
            28ARTICLE
      7
            COVENANTS
      OF THE PARTIES
            29Section
      7.1
            HSR
      Act
            29Section
      7.2
            Government
      Reviews
            29Section
      7.3
            Notification
      of Breaches
            29Section
      7.4
            Letters-in-Lieu;
      Assignments; Operatorship
            30Section
      7.5
            Public
      Announcements
            30Section
      7.6
            Operation
      of Business
            31Section
      7.7
            Preference
      Rights and Transfer Requirements
            31Section
      7.8
            Tax
      Matters
            33Section
      7.9
            Further
      Assurances
            34Section
      7.10
            Performance
      Bond
            34





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Section
      7.11
            Insurance
            34Section
      7.12
            No
      Solicitation of Transactions
            34Section
      7.13
            Record
      Retention
            34Section
      7.14
            Bonds,
      Letters of Credit and Guarantees
            35Section
      7.15
            Cure
      of Misrepresentations Guarantees
            35Section
      7.16
            Cooperation
      with Respect to Seller Retained Litigation, Etc.
            35Section
      7.17
            Plugging,
      Abandonment, Decommissioning and Other Costs
            35Section
      7.18
            Employee
      Matters
            35ARTICLE
      8
            CONDITIONS
      TO CLOSING
            37Section
      8.1
            Conditions
      of Seller to Closing
            37Section
      8.2
            Conditions
      of Purchaser to Closing
            39ARTICLE
      9
            CLOSING
            40Section
      9.1
            Time
      and Place of Closing
            40Section
      9.2
            Obligations
      of Seller at Closing
            41Section
      9.3
            Obligations
      of Purchaser at Closing
            41Section
      9.4
            Closing
      Adjustments and Closing Payments
            41ARTICLE
      10
            TERMINATION
            43Section
      10.1
            Termination
            44Section
      10.2
            Effect
      of Termination
            44Section
      10.3
            Distribution
      of Deposit Upon Termination
            44ARTICLE
      11
            POST-CLOSING
      OBLIGATIONS; INDEMNIFICATION; LIMITATIONS; DISCLAIMERS AND
      WAIVERS
            45Section
      11.1
            Assumed
      Seller Obligations
            45Section
      11.2
            Survival
            46Section
      11.3
            Indemnification
      by Seller
            46Section
      11.4
            Indemnification
      by Purchaser
            47Section
      11.5
            Indemnification
      Proceedings
            47Section
      11.6
            Limitations
      on Indemnities
            49Section
      11.7
            Release
            49Section
      11.8
            Disclaimers
            50Section
      11.9
            Recording
            51Section
      11.10
            Non-Compensatory
      Damages
            51Section
      11.11
            Disclaimer
      of Application of Anti-Indemnity Statutes
            52Section
      11.12
            Tax
      Indemnification
            52ARTICLE
      12
            MISCELLANEOUS
            53Section
      12.1
            Counterparts
            53Section
      12.2
            Notices
            54Section
      12.3
            Sales
      or Use Tax Recording Fees and Similar Taxes and Fees
            54





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Section
      12.4
            Expenses
            54Section
      12.5
            Change
      of Name
            55Section
      12.6
            Governing
      Law and Venue
            55Section
      12.7
            Captions
            55Section
      12.8
            Waivers
            55Section
      12.9
            Assignment
            55Section
      12.10
            Entire
      Agreement
            56Section
      12.11
            Amendment
            56Section
      12.12
            No
      Third-Party Beneficiaries
            56Section
      12.13
            References
            56Section
      12.14
            Construction
            57Section
      12.15
            Conspicuousness
            57Section
      12.16
            Severability
            57Section
      12.17
            Time
      of Essence
            57Section
      12.18
            Limitation
      on Damages
            57Section
      12.19
            Access
      for Financial Reporting Purposes
            57


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EXHIBITS







Exhibit “A”
            LeasesExhibit “A-1”
            Wells
      and UnitsExhibit “B”
            Form
      of Assignment, Conveyance and Bill of SaleExhibit “C”
            Form
      of Title Indemnity AgreementExhibit “D”
            Form
      of Transition Services AgreementExhibit
      “E”
            Certificate
      of Non-Foreign Status







SCHEDULES




Schedule
      1.2(d)
            ContractsSchedule
      1.2(e)
            EasementsSchedule
      1.2(k)
            Vehicles
      and VesselsSchedule
      1.2(l)
            Geologic
      DataSchedule
      1.3(e)
            Excluded
      AssetsSchedule
      3.3(m)
            Permitted
      EncumbrancesSchedule
      3.4(a)
            Allocated
      ValuesSchedule
      5.7
            LitigationSchedule
    5.8
            Taxes
      and AssessmentsSchedule
      5.9
            Compliance
      with LawsSchedule
      5.10
            ContractsSchedule
      5.11
            Hydrocarbon
      Production PaymentsSchedule
      5.12
            Governmental
      AuthorizationsSchedule
      5.15
            Outstanding
      Capital CommitmentsSchedule
      5.16
            ImbalancesSchedule
      5.20
            Abandoned
      WellsSchedule
      5.21
            Seller
      Affiliate ObligationsSchedule
      7.6
            Operation
      of BusinessSchedule
      7.7
            Preference
      Rights and Transfer RequirementsSchedule
      7.14
            Bonds
      Required





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DEFINITIONS




“Adjustment
Period” means the period between the Effective Time and the Closing
Date.




“Adjusted
Purchase Price” shall mean the Purchase Price after calculating and applying the
adjustments set forth in Section 2.2.




“AFE”
means authority for expenditure.




“Affected
Well” has the meaning set forth in Section 3.4(g)(v).




“Affiliates”
with respect to any Person, means any Person that directly or indirectly
controls, is controlled by or is under common control with such
Person.  The concept of control, controlling or controlled as used in
the aforesaid context means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of another,
whether through the ownership of voting securities, by contract or
otherwise.  No Person shall be deemed an Affiliate of any Person by
reason of the exercise or existence of rights, interests or remedies under this
Agreement.




“Agreed
Interest Rate” means the rate of interest published in the Wall Street Journal from time
to time, as the one month London Interbank Offered Rate (LIBOR) plus 75 basis
points, with adjustments in that rate to be made on the same day as any change
in that rate.




“Agreement”
means this Purchase and Sale Agreement.




“Allocated
Value” has the meaning set forth in Section 3.4(a).




“Applicable
Contracts” means all Contracts by which the Properties and other Assets are
bound or that primarily relate to the Properties or other Assets and (in each
case) that will be binding on the Assets or Purchaser after the Closing,
including, without limitation; farmin and farmout agreements; bottomhole
agreements; crude oil, condensate and natural gas purchase and sale, gathering,
transportation and marketing agreements; hydrocarbon storage agreements; acreage
contribution agreements; operating agreements; balancing agreements; pooling
declarations or agreements; unitization agreements; processing agreements;
saltwater disposal agreements; facilities or equipment leases; crossing
agreements; letters of no objection; platform use agreements; production
handling agreements; and other similar contracts and agreements, of Seller and
primarily related to the Properties or other Assets, but exclusive of any master
service agreements.




“Assessment”
has the meaning set forth in Section 4.1(b).




“Assets”
has the meaning set forth in Section 1.2.




“Assumed
Seller Obligations” has the meaning set forth in Section 11.1.


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“Bond”
has the meaning set forth in Section 7.10(a).




“Business
Day” means each calendar day except Saturdays, Sundays, and Federal
holidays.




“Business
Employees” means those full time and part time employees (hourly and salaried)
of Seller as identified by Seller at least fifteen (15) Business Days prior to
the Closing Date.




“Claim”
or “Claims” means any demand, claim or notice sent or given by a Person to
another Person in which the former asserts that it has suffered a Loss or has
become party to a Proceeding that is the responsibility of the latter
Person.




“Claim
Notice” has the meaning set forth in Section 11.3(b).




“Closing”
has the meaning set forth in Section 9.1(a).




“Closing
Date” has the meaning set forth in Section 9.1(b).




“Closing
Payment” has the meaning set forth in Section 9.4(a).




“Closing
Statements” means the Preliminary Closing Statement and the Final Closing
Statement.




“Code”
means the Internal Revenue Code of 1986, as amended.




“Confidentiality
Agreement” has the meaning set forth inSection 4.1(g).




“Contracts”
has the meaning set forth in Section 1.2(d).




“Conveyances”
has the meaning set forth in Section 3.1(b).




“Cure
Period” has the meaning set forth in Section 3.4(b).




“Customary
Post-Closing Consents” means the consents and approvals for the assignment of
the Assets to Purchaser that are customarily obtained after the assignment of
properties similar to the Assets.




“Defective
Support Property” has the meaning set forth in Section
3.4(g)(v).




“Defensible
Title” has the meaning set forth in Section 3.2.




“Deposit”
has the meaning set forth in Section 2.4.




“DOJ”
shall mean the Department of Justice.




“Easements”
has the meaning set forth in Section 1.2(e).




“Effective
Time” has the meaning set forth in Section 1.4(a).




“Environmental
Claim Date” has the meaning set forth in Section 4.3.


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“Environmental
Defect” has the meaning set forth in Section 4.3.




“Environmental
Defect Amount” has the meaning set forth in Section 4.3.




“Environmental
Defect Deductible” has the meaning set forth in Section 4.3.




Environmental
Defect Notice” has the meaning set forth in Section 4.3.




“Environmental
Laws” means, as the same may have been amended, superseded or replaced, any
federal, state or local statute, law, regulation, ordinance, rule, order or
decree including any rule of common law, relating to (i) the control of any
potential pollutant or protection of the environment, including air, water or
land, (ii) the generation, handling, treatment, storage, disposal or
transportation of waste materials, or (iii) the regulation of or exposure to
Hazardous Materials alleged to be harmful, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
§ 9601 et seq.
(“CERCLA”); the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. (“RCRA”); the
Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Clean
Air Act, 42 U.S.C. § 7401 et seq. the Hazardous
Materials Transportation Act, 49 U.S.C. § 1471 et seq.; the Toxic
Substances Control Act, 15 U.S.C. §§ 2601 through 2629; the Oil Pollution Act,
33 U.S.C. § 2701 et
seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. §
11001 et seq.;
the Safe Drinking Water Act, 42 U.S.C. §§ 300f through 300j; the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq.; the
Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.; the Atomic
Energy Act, 42 U.S.C. § 2011 et seq.; and all
applicable related law, whether local, state, territorial, or national, of any
Governmental Body having jurisdiction over the property in question addressing
pollution or protection of human health, safety, natural resources or the
environment and all regulations implementing the foregoing.  The term
“Environmental Laws” includes all judicial and administrative decisions, orders,
directives, and decrees issued by a Governmental Body pursuant to the
foregoing.




“Environmental
Liabilities” shall mean any and all environmental response costs (including
costs of remediation), damages, natural resource damages, settlements,
consulting fees, expenses, penalties, fines, orphan share, prejudgment and
post-judgment interest, court costs, attorneys’ fees, and other liabilities
incurred or imposed (i) pursuant to any order, notice of responsibility,
directive (including requirements embodied in Environmental Laws), injunction,
judgment or similar act (including settlements) by any Governmental Body to the
extent arising out of any violation of, or remedial obligation under, any
Environmental Laws which are attributable to the ownership or operation of the
Assets prior to, on or after the Effective Time or (ii) pursuant to any claim or
cause of action by a Governmental Body or other Person for personal injury,
property damage, damage to natural resources, remediation or response costs to
the extent arising out of any exposure to Hazardous Materials, any violation of,
or any remediation or obligation under, any Environmental Laws which is
attributable to the ownership or operation of the Assets prior to, on or after
the Effective Time.




“Equipment”
has the meaning set forth in Section 1.2(f).




“ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.




“Excluded
Assets” has the meaning set forth in Section 1.3.


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“Excluded
Seller Obligations” has the meaning set forth in Section 11.1.




“Final
Closing Statement” has the meaning set forth in Section 9.4(b).




“Final
Determination” means, with respect to any Taxes, (i) the expiration of the
statute of limitations on both assessments and refunds of such Taxes, or (ii)
the final settlement of Taxes through agreement of the parties or by an
administrative or judicial decision from which no appeal can be taken or for
which the time for taking any such appeal has expired.




“FTC”
shall mean the Federal Trade Commission.




“Fundamental
Representations” has the meaning set forth in Section 11.2(a).




“Geologic
Data” means all (i) seismic, geological, geochemical or geophysical data
(including cores and other physical samples of materials from wells or tests)
belonging to Seller or licensed from third parties relating to the Properties
that can be transferred without additional consideration to such third parties
(or including such licensed data in the event Purchaser agrees to pay such
additional consideration), and (ii) interpretations of seismic, geological,
geochemical or geophysical data belonging to Seller or licensed from third
parties that can be transferred without additional consideration to such third
parties (or including such licensed data in the event Purchaser agrees to pay
such additional consideration).




“Governmental
Authorizations” has the meaning set forth in Section 5.12.




“Governmental
Body” or “Governmental Bodies” means any federal, state, local, municipal, or
other government; any governmental, regulatory or administrative agency,
commission, body or other authority exercising or entitled to exercise any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power; and any court or governmental tribunal.




“Hazardous
Material” means (i) any “hazardous substance,” as defined by CERCLA, (ii) any
“hazardous waste” or “solid waste,” in either case as defined by RCRA, and any
analogous state statutes, and any regulations promulgated thereunder, (iii) any
solid,  hazardous, dangerous or toxic chemical, material, waste or
substance, within the meaning of and regulated by any applicable Environmental
Laws, (iv) any radioactive material, including any naturally occurring
radioactive material, and any source, special or byproduct material as defined
in 42 U.S.C. 2011 et seq. and any amendments or authorizations thereof, (v)
any regulated asbestos-containing materials in any form or condition, (vi) any
regulated polychlorinated biphenyls in any form or condition, and (vii)
petroleum, petroleum hydrocarbons or any fraction or byproducts
thereof.




“HSR Act”
means the Hart-Scott Rodino Antitrust Improvements Act of 1976.




“Hydrocarbons”
means oil, gas, casinghead gas, condensate and other gaseous and liquid
hydrocarbons or any combination thereof and sulphur and other minerals extracted
from or produced with the foregoing.




“Imbalance”
or “Imbalances” means any over-production, under-production, over-delivery,
under-delivery or similar imbalance of Hydrocarbons produced from or allocated
to the Assets,


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regardless
of whether such over-production, under-production, over-delivery under-delivery
or similar imbalance arises at the platform, wellhead, pipeline, gathering
system, transportation system, processing plant or other location.




“Indemnified
Party” has the meaning set forth in Section 11.3(a).




“Indemnifying
Party” has the meaning set forth in Section 11.3(a).




“Indemnity
Agreement” has the meaning set forth in Section
3.4(d)(ii).




“Independent
Expert” has the meaning set forth in Section 4.3.




“Individual
Benefit Threshold” has the meaning set forth in Section 3.4(j).




“Individual
Environmental Threshold” has the meaning set forth in Section 4.3.




“Individual
Title Threshold” has the meaning set forth in Section 3.4(g).




“Invasive
Activity” has the meaning set forth in Section 4.1(b).




“Lands”
has the meaning set forth in Section 1.2(a).




“Laws”
means all statutes, laws, rules, regulations, ordinances, orders, and codes of
Governmental Bodies.




“Leases”
has the meaning set forth in Section 1.2(a).




“Losses”
means any and all debts, obligations and other liabilities (whether absolute,
accrued, contingent, fixed or otherwise, or whether known or unknown, or due or
to become due or otherwise), diminution in value, monetary damages, fines, fees,
Taxes, penalties, interest obligations, deficiencies, losses and expenses
(including amounts paid in settlement, interest, court costs, costs of
investigators, reasonable fees and expenses of attorneys, accountants, financial
advisors and other experts, and other actual out of pocket expenses incurred in
investigating and preparing for or in connection with any
Proceeding).




“Lowest
Cost Response” means the response required or allowed under Environmental Laws
that addresses the condition present at the lowest cost (considered as a whole
taking into consideration any material negative impact such response may have on
the operations of the relevant assets and any potential material additional
costs or liabilities that may likely arise as a result of such response) as
compared to any other response that is required or allowed under Environmental
Laws.




“Material
Adverse Effect” means any effect that is material and adverse to the ownership,
operation or value of the Assets, taken as a whole, and as currently operated;
provided, however, that “Material Adverse Effect” shall not include (i) any
effect resulting from entering into this Agreement or the announcement of the
transactions contemplated by this Agreement; (ii) any effect resulting from
changes in general market, economic, financial or political conditions or any
outbreak of hostilities or war, (iii) any effect that affects the Hydrocarbon
exploration,


Page
xi


production,
development, processing, gathering and/or transportation industry generally
(including changes in commodity prices or general market prices in the
Hydrocarbon exploration, production, development, processing, gathering and/or
transportation industry generally), and (iv) any effect resulting from a change
in Laws or regulatory policies.




“Material
Environmental Defect” means an uncured Environmental Defect that exceeds the
Individual Environmental Threshold.




“Material
Title Benefit” means a Title Benefit that exceeds the Individual Benefit
Threshold.




“Material
Title Defect” means an uncured Title Defect that exceeds the Individual Title
Threshold.




“Net
Revenue Interest” has the meaning set forth in Section 3.2(a).




“NORM”
means naturally occurring radioactive material.




“Notice
Period” has the meaning set forth in Section 11.5(a).




“P&A
Obligations” has the meaning set forth in Section 7.16.




“Permitted
Encumbrances” has the meaning set forth in Section 3.3.




“Person”
means any individual, firm, corporation, partnership, limited liability company,
joint venture, association, trust, unincorporated organization, Governmental
Body or any other entity.




“Pipelines”
has the meaning set forth in Section 1.2(g).




“Pre-Closing
Period” means any Tax period ending on or before the Closing Date.




“Preference
Property” has the meaning set forth in Section 7.7(b).




“Preference
Right” means any right or agreement that enables any Person to purchase or
acquire any Asset or any interest therein or portion thereof as a result of or
in connection with (i) the sale, assignment or other transfer of any Asset or
any interest therein or portion thereof or (ii) the execution or delivery of
this Agreement or the consummation or performance of the terms and conditions
contemplated by this Agreement.




“Preliminary
Closing Statement” has the meaning set forth in Section 9.4(a).




“Proceeding”
has the meaning set forth in Section 5.7.




“Properties”
has the meaning set forth in Section 1.2(c).




“Property
Costs” has the meaning set forth in Section 1.4(b).




“Property
Taxes” means ad valorem taxes, real property taxes, personal property taxes and
similar obligations.


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“Purchase
Price” has the meaning set forth in Section 2.1.




“Purchaser”
has the meaning set forth in the preamble hereto.




“Purchaser
Indemnified Persons” has the meaning set forth in Section 11.3.




“Purchaser’s
Representatives” has the meaning set forth in Section 4.1(a).




“Records”
has the meaning set forth in Section 1.2(j).




“REGARDLESS OF FAULT” means
WITHOUT REGARD TO THE CAUSE OR
CAUSES OF ANY CLAIM, INCLUDING, WITHOUT LIMITATION, EVEN THOUGH A CLAIM IS
CAUSED IN WHOLE OR IN PART BY:




OTHER
THAN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, THE NEGLIGENCE (WHETHER SOLE,
JOINT, CONCURRENT, COMPARATIVE, CONTRIBUTORY, ACTIVE OR PASSIVE), STRICT
LIABILITY, OR OTHER FAULT OF THE SELLER INDEMNIFIED PERSONS; AND/OR




A
PRE-EXISTING DEFECT, WHETHER PATENT OR LATENT, OF THE PREMISES OF PURCHASER’S
PROPERTY OR SELLER’S PROPERTY (INCLUDING WITHOUT LIMITATION THE ASSETS),
INVITEES AND/OR THIRD PARTIES; AND/OR




THE
UNSEAWORTHINESS OF ANY VESSEL OR UNAIRWORTHINESS OF ANY AIRCRAFT OF A PARTY
WHETHER CHARTERED, OWNED, OR PROVIDED BY THE PURCHASER INDEMNIFIED PERSONS,
SELLER INDEMNIFIED PERSONS, INVITEES AND/OR THIRD PARTIES.




“Retained
Asset” has the meaning set forth in Section 7.7(c).




“Retained
Employee Liabilities” shall mean any liabilities of Seller or any of its
Affiliates (i) to employees of Seller or any of its Affiliates arising under the
Worker Adjustment and Retraining Notification Act of 1988, as amended (or
similar state or local law), as a result of actions taken by Seller or any of
its Affiliates on or prior to the Closing, (ii) arising out of claims by or on
behalf of employees of Seller or any of its Affiliates with respect to events
that occur on or prior to the Closing and that relate to their employment with,
or the terminations of their employment from, Seller, (iii) with respect to
employees of Seller or any of its Affiliates arising under any “employee benefit
plan” (as defined in Section 3(3) of ERISA) that is or has been sponsored by,
contributed to, or maintained by, Seller or any of its Affiliates, or (iv)
arising under ERISA for which Purchaser may have any liability under ERISA
solely as a result of the consummation of the transaction contemplated by this
Agreement.




“Security
Replacements” has the meaning set forth in Section 7.14.




“Seller
Operated Assets” shall mean Assets operated by Seller.  Page
xiii


“Straddle
Period” means any Tax period beginning on or before and ending after the
Effective Date.




“Tax
Proceeding” shall mean any audit, litigation or other proceeding.




“Tax
Return” shall mean any return, declaration or report relating to Taxes due, any
information return with respect to Taxes, or other similar report, statement,
declaration or document required to be filed under the Code or other Laws in
respect of Taxes, any amendment to any of the foregoing, any claim for refund of
Taxes paid, and any attachments, amendments or supplements to any of the
foregoing.




“Taxes”
shall mean any federal, state, county, local, or foreign tax (including Transfer
Taxes), charge, fee, levy, impost, duty, or other assessment, including income,
gross receipts, excise, employment, sales, use, transfer, recording, license,
payroll, franchise, severance, documentary, stamp, occupation, windfall profits,
environmental, highway use, commercial rent, customs duty, capital stock,
paid-up capital, profits, withholding, Social Security, single business,
unemployment, disability, real property, personal property, registration, ad
valorem, value added, alternative or add-on minimum, estimated, margin, or other
tax or governmental fee of any kind whatsoever, imposed or required to be
withheld by any Governmental Body, including any estimated payments relating
thereto, any interest, penalties, and additions imposed thereon or with respect
thereto, whether disputed or not, and including liability for taxes of another
person under Treas. Reg. Section 1.1502-6 or similar provision of state, local
or foreign law, or as a transferee, indemnitor, or successor, by contract or
otherwise.




“Taxing
Authority” shall mean any Governmental Body having jurisdiction over the
assessment, determination, collection, or other imposition of any
Taxes.






“Title
Arbitrator” has the meaning set forth in Section 3.4(f).




“Title
Benefit Deductible” has the meaning set forth in Section 3.4(j).




“Title
Claim Date” has the meaning set forth in Section 3.4(a).




“Title
Defect” has the meaning set forth in Section 3.2.




“Title
Defect Amount” has the meaning set forth in Section 3.4(c)(i).




“Title
Defect Deductible” has the meaning set forth in Section 3.4(g).




“Title
Defect Notice” has the meaning set forth in Section 3.4(a).




“Title
Defect Property” has the meaning set forth in Section 3.4(a).




“Transferred
Employee” has the meaning set forth in Section 7.18(b).




“Transition
Services Agreement” has the meaning set forth in Section 9.2(e).


Page
xiv


“Transfer
Requirement” means any consent, approval, authorization or permit of, or filing
with or notification to, any Person which is required to be obtained, made or
complied with for or in connection with any sale, assignment or transfer of any
Asset or any interest therein; provided, however, that “Transfer Requirement”
shall not include any consent of, notice to, filing with, or other action by any
Governmental Body in connection with the sale or conveyance of oil and/or gas
leases or interests therein or Easements or interests therein, if they are not
required prior to the assignment of such oil and/or gas leases, Easements or
interests or they are customarily obtained subsequent to the sale or conveyance
(including consents from state agencies).




“Units”
has the meaning set forth in Section 1.2(c).




“Wells”
has the meaning set forth in Section 1.2(b).


Page
xv


PURCHASE AND SALE
AGREEMENT




This
Purchase and Sale Agreement (this “Agreement”) is executed on November 25, 2009,
by and between Merit Management Partners I, L.P., Merit Management Partners II,
L.P., Merit Management Partners III, L.P., Merit Energy Partners III, L.P.,
Merit Energy Partners D-III, L.P., Merit Energy Partners E-III, L.P., Merit
Energy Partners F-III, L.P. (collectively, “Seller”), and Linn Energy Holdings,
LLC, a Delaware limited liability company (“Purchaser”).




RECITALS




A.          Seller
owns various oil and gas properties, either of record or beneficially, more
fully described in the exhibits hereto.




B.           Seller
desires to sell to Purchaser and Purchaser desires to purchase from Seller the
properties and rights of Seller hereafter described, in the manner and upon the
terms and conditions hereafter set forth.




C.           Capitalized
terms used herein shall have the meanings ascribed to them in this Agreement as
such terms are identified and/or defined in the preceding Definitions Section
hereof.




NOW,
THEREFORE, in consideration of the premises and of the mutual promises,
representations, warranties, covenants, conditions and agreements contained
herein, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally bound
by the terms hereof, agree as follows:






ARTICLE
1


PURCHASE
AND SALE




Section
1.1                      Purchase and
Sale.




At the
Closing, and upon the terms and subject to the conditions of this Agreement,
Seller agrees to sell, transfer and convey the Assets to Purchaser and Purchaser
agrees to purchase, accept and pay for the Assets and to assume the obligations
attributable to the Assets (including, without limitation the Assumed Seller
Obligations).




Section
1.2                      Assets.




As used
herein, the term “Assets” means, subject to the terms and conditions of this
Agreement, all of Seller’s right, title, interest and estate, real or personal,
recorded or unrecorded, movable or immovable, tangible or intangible, in and to
the following (but excluding the Excluded Assets):




(a)           All
of (i) the oil and gas leases; subleases and other leaseholds; net profits
interests; carried interests; farmout rights; options; and other properties and
interests described on Exhibit A(collectively,
the “Leases”), together with each and every kind and character of





right,
title, claim, and interest that Seller has in and to the lands covered by the
Leases or the lands currently pooled, unitized, communitized or consolidated
therewith (the “Lands”);




(b)           All
oil, gas, water, disposal or injection wells located on the Lands, whether
producing, shut-in, or abandoned, including the wells shown on Exhibit A-1, whether
producing, shut-in, or temporarily abandoned (even to the extent not located on
the Lands) (collectively, the “Wells”);




(c)           All
interest of Seller derived from the Leases in or to any pools or units which
include any Lands or all or a part of any Leases or include any Wells, including
those pools or units shown on Exhibit A-1 (the “Units”;
the Units, together with the Leases, Lands and Wells, being hereinafter referred
to as the “Properties”), and including all interest of Seller derived from the
Leases in production of Hydrocarbons from any such Unit, whether such Unit
production of Hydrocarbons comes from Wells located on or off of a Lease, and
all tenements, hereditaments and appurtenances belonging to the Leases and
Units;




(d)           All
contracts, agreements and instruments by which the Properties are bound, or that
relate to or are otherwise applicable to the Properties, only to the extent
applicable to the Properties rather than Seller’s other properties, including
but not limited to, operating agreements, unitization, pooling and
communitization agreements, declarations and orders, joint venture agreements,
farmin and farmout agreements, exploration agreements, participation agreements,
exchange agreements, transportation or gathering agreements, agreements for the
sale and purchase of oil, gas, casinghead gas or processing agreements to the
extent applicable to the Properties or the production of Hydrocarbons produced
in association therewith from the Properties, including those identified on
Schedule 1.2(d)(hereinafter collectively referred to as “Contracts”), but excluding any
master service agreements and any contracts, agreements and instruments to the
extent transfer is restricted by third-party agreement or applicable Law and the
necessary consents to transfer are not obtained pursuant to Section 7.7 and provided
that “Contracts” shall not include the instruments constituting the
Leases;




(e)           All
easements, permits, licenses, servitudes, rights-of-way, surface leases and
other surface rights (“Easements”) appurtenant to, and used or held for use in
connection with the Properties (including those identified on Schedule 1.2(e)), but
excluding any permits and other rights to the extent transfer is restricted by
third-party agreement or applicable Law and the necessary consents to transfer
are not obtained pursuant to Section 7.7;




(f)           All
equipment, machinery, fixtures and other tangible personal property and
improvements located on the Properties owned by Seller and used or held for use
primarily in connection with the operation of the Properties (other than
vehicles or vessels which are addressed specifically by Section 1.2(k)) (collectively,
“Equipment”);




(g)           All
flow lines, pipelines, gathering systems and appurtenances thereto located on
the Properties or used, or held for use, in connection with the operation of the
Properties (“Pipelines” and, together with the Equipment and Wells, “Personal
Property”);




(h)           All
Hydrocarbons produced from or attributable to the Leases, Lands, and Wells from
and after the Effective Time;


45870756.5
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(i)           All
Imbalances;




(j)           All
lease files; land files; well files; gas and oil sales contract files; gas
processing files; division order files; abstracts; title opinions; land surveys;
logs; maps; engineering data and reports; interpretive data, technical
evaluations and technical outputs; and other books, records, data, files, and
accounting records, in each case to the extent related to the Assets, or used or
held for use in connection with the maintenance or operation thereof, but
excluding (i) any books, records, data, files, logs, maps, evaluations, outputs,
and accounting records to the extent disclosure or transfer would result in a
violation of applicable Law or is restricted by any Transfer Requirement that is
not satisfied pursuant to Section 7.7, (ii) computer or
communications software or intellectual property (including tapes, codes, data
and program documentation and all tangible manifestations and technical
information relating thereto), (iii) attorney-client privileged communications
and work product of Seller’s or any of its Affiliates’ legal counsel (other than
title opinions), (iv) reserve studies and evaluations, and (v) records relating
to the negotiation and consummation of the sale of the Assets (subject to such
exclusions, the “Records”); provided, however, that Seller may retain the
originals of such Records as Seller has reasonably determined may be required
for existing litigation, tax, accounting, and auditing purposes;




(k)           Those
vehicles and vessels specifically listed on Schedule 1.2(k);
and




(l)           All
Geological Data specifically listed on Schedule 1.2(l).




Section
1.3                      Excluded
Assets.




Notwithstanding
the foregoing, the Assets shall not include, and there is excepted, reserved and
excluded from the purchase and sale contemplated hereby (collectively, the
“Excluded Assets”):




(a)           all
corporate, partnership, limited liability company, financial, income and
franchise tax and legal records of Seller that relate to Seller’s business
generally (whether or not relating to the Assets), and all books, records and
files that relate to the Excluded Assets and those records retained by Seller
pursuant to Section 1.2(j) and copies
of any other Records retained by Seller pursuant to Section 1.5;




(b)           All
reserve estimates, economic estimates, and, to the extent excluded from Section 1.2(i), all logs,
interpretive data, technical evaluations and technical outputs;




(c)           all
rights to any refund of Taxes or other costs or expenses borne by Seller or
Seller’s predecessors in interest and title attributable to periods prior to the
Effective Time;




(d)           Seller’s
area-wide bonds, permits and licenses or other permits, licenses or
authorizations used in the conduct of Seller’s business generally;




(e)           those
items listed in Schedule
1.3(e);  45870756.5
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(f)           all
trade credits, account receivables, note receivables, take-or-pay amounts
receivable, and other receivables attributable to the Assets with respect to any
period of time prior to the Effective Time;




(g)           all
claims and causes of action (including any claims for insurance proceeds)
arising from acts, omissions or events or damage to or destruction of property
with respect to all periods prior to the Effective Time;




(h)           except
to the extent specifically provided in Section 1.2(k), all right,
title and interest of Seller in and to vehicles or vessels used in connection
with the Assets;




(i)           all
rights, titles, claims and interests of Seller or any Affiliate of Seller (i) to
or under any policy or agreement of insurance or any insurance proceeds; except
to the extent provided in Section 3.5, and (ii) to
or under any bond or bond proceeds;




(j)           any
patent, patent application, logo, service mark, copyright, trade name, trademark
or other intellectual property of or associated with Seller or any Affiliate of
Seller or any business of Seller or of any Affiliate of Seller;




(k)           all
personal computers and associated peripherals and all radio and telephone
equipment;




(l)           all
proprietary and other computer software;




(m)           all
documents and instruments of Seller that may be protected by an attorney-client
privilege other than with respect to title opinions;




(n)           except
to the extent specifically provided in Section 1.2(l), all Geologic
Data; and




(o)           any
offices, office leases or personal property that are not directly related to the
Assets.




Section
1.4                      Effective
Time; Proration of Costs and Revenues.




(a)           Subject
to Section 1.5,
possession of the Assets shall be transferred from Seller to Purchaser at the
Closing, but for purposes of the adjustments made to the Closing Statements
certain financial benefits and burdens of the Assets shall be transferred
effective as of 7:00 A.M., local time, on November 1, 2009 (the “Effective
Time”), as described below.




(b)           
“Earned” and “incurred”, as used in this Agreement, shall be interpreted in
accordance with generally accepted accounting principles and Council of
Petroleum Accountants Society (COPAS) standards, as applicable. “Property Costs”
means all costs attributable to the ownership and operation of the Assets
(including without limitation costs of insurance relating specifically to the
Assets, royalties and overriding royalties payable on account of production from
the Assets, Property Taxes, and severance, Hydrocarbon production and similar
Taxes based upon or measured by the ownership or operation of the Assets or the
production of Hydrocarbons therefrom, but excluding any other Taxes) and capital
expenditures incurred in the ownership and operation of the Assets in the
ordinary course of business and, where applicable,  45870756.5
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in
accordance with the relevant operating or unit agreement, if any, and overhead
costs charged to the Assets under the relevant operating agreement or unit
agreement, if any, by unaffiliated third parties and, with respect to Assets
operated by Seller, $250,000 per month (pro rated for any partial months as
applicable), but excluding without limitation liabilities, losses, costs, and
expenses attributable to (i) claims for personal injury or death, property
damage or violation of any Law, (ii) obligations to plug wells or dismantle,
abandon and salvage facilities, (iii) obligations to remediate any contamination
of groundwater, surface water, soil, Equipment or Pipelines under applicable
Environmental Laws, (iv) obligations to furnish make-up gas according to the
terms of applicable gas sales, gathering or transportation contracts, (v) gas
balancing obligations and (vi) obligations to pay working interests, royalties,
overriding royalties or other interests held in suspense, all of which are
addressed in Article 11 or elsewhere
in this Agreement.  Determination of whether Property Costs are
attributable to the period before or after the Effective Time for purposes of
the adjustments in the Closing Statements shall be based on when services are
rendered, when the goods are delivered, or when the work is
performed.  For clarification, the date an item or work is ordered is
not the date of a transaction for settlement purposes in the Closing Statements,
but rather the date on which the item ordered is delivered to the job site, or
the date on which the work ordered is performed, shall be the relevant
date.  For purposes of allocating Hydrocarbon production (and accounts
receivable with respect thereto), (i) liquid Hydrocarbons shall be deemed to be
“from or attributable to” the Leases, Units and Wells when they pass through the
pipeline connecting into the storage facilities into which they are run and (ii)
gaseous Hydrocarbons shall be deemed to be “from or attributable to” the Leases,
Units and Wells when they pass through the delivery point sales meters on the
pipelines through which they are transported. Seller shall utilize reasonable
interpolative procedures to arrive at an allocation of Hydrocarbon production
when exact meter readings or gauging and strapping data is not available. Seller
shall provide to Purchaser, no later than three (3) Business Days prior to
Closing, all data necessary to support any estimated allocation, for purposes of
establishing the adjustment to the Purchase Price pursuant to Section 2.2 hereof that
will be used to determine the Closing Payment for purposes of the Preliminary
Closing Statement (as defined in Section 9.4(a)).




(c)           Property
Taxes with respect to the Assets, right-of-way fees with respect to the Assets,
insurance premiums with respect to the Assets and any other Property Costs that
are paid periodically shall be prorated based on the number of days in the
applicable period falling before and the number of days in the applicable period
falling at or after the Effective Time, except that Hydrocarbon production,
severance and similar Taxes shall be prorated based on the number of units
actually produced, purchased or sold or proceeds of sale, as applicable, before,
and at or after, the Effective Time.   Except as otherwise
provided in this Agreement (including, without limitation Article 11), Seller is
responsible for all Taxes, right-of-way fees, insurance premiums and the
Property Costs allocable to the period falling before the Effective Time
and  Purchaser is responsible for all Taxes, right-of-way fees,
insurance premiums and the Property Costs allocable to the period falling at or
after the Effective Time..




Section
1.5                      Delivery
and Maintenance of Records.




Seller,
at Purchaser’s sole cost and expense, shall deliver the Records to Purchaser
within sixty (60) days following Closing; provided, however, that Seller shall be
entitled to retain those original Records necessary to comply with its
obligations under any Transition Services


45870756.5
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Agreement
(if applicable) for so long as is reasonably necessary to comply with its
obligations thereunder and Seller, at Purchaser’s sole expense, shall provide
Purchaser with copies of any such original Records retained by Seller as soon as
reasonably practicable.  Other than any original Records retained by
Seller pursuant to Section
1.2(i), Purchaser shall be entitled to all original Records maintained by
Seller.  Seller shall be entitled to keep a copy or copies of all
Records; provided, however, that Seller shall not sell or otherwise allow third
parties to review, copy or otherwise use (for any purpose) any Records retained
by Seller for their own account.  Purchaser shall preserve the Records
for a period of seven (7) years following the Closing and will allow Seller and
its representatives, consultants and advisors reasonable access, during normal
business hours and upon reasonable notice, to the Records for any legitimate
business reason of Seller, including in order for Seller to comply with a Tax or
other legally required reporting obligation or Tax or legal dispute; provided,
however, that Purchaser shall not be required to grant access to Seller or any
of its representatives, consultants or advisors, to any Records that are subject
to an attorney/client or attorney work product privilege or that would cause
Purchaser to violate any obligation to any third party or breach any restriction
legally binding on Purchaser.  Any such access shall be at the sole
cost and expense of Seller.  Unless otherwise consented to in writing
by Seller, for a period of seven (7) years following the Closing Date, Purchaser
shall not and shall cause its Affiliates not to, destroy, alter or otherwise
dispose of the Records, or any portions thereof, without first giving at least
thirty (30) days prior written notice to Seller and offering to surrender to
Seller the Records or such portions thereof.






ARTICLE
2


PURCHASE
PRICE




Section
2.1                      Purchase
Price.




The
purchase price for the Assets (the “Purchase Price”) shall be One Hundred Fifty
Four Million Five Hundred Thousand Dollars ($154,500,000) payable in United
States currency by wire transfer in same day funds as and when provided in this
Agreement and as adjusted as provided in Section 2.2.




Section
2.2                      Adjustments
to Purchase Price.




For
purposes of the Closing Statements, the Purchase Price for the Assets shall be
adjusted as follows (with such adjustments being made so as not to give any
duplicative effect) with all such amounts being determined in accordance with
generally accepted accounting principles and Council of Petroleum Accountants
Society (COPAS) standards:




(a)           Reduced
by the aggregate amount of the following proceeds actually received by Seller:
(i) proceeds from the sale of Hydrocarbons (net of any royalties, overriding
royalties or other burdens on or payable out of Hydrocarbon production,
gathering, processing and transportation costs and any Hydrocarbon production,
severance, sales or excise Taxes not reimbursed to Seller by the purchaser of
Hydrocarbon production) produced from or attributable to the Properties during
the period between the Effective Time and the date the Final Closing Statement
is executed by Seller and Purchaser, and (ii) other proceeds earned with respect
to the


45870756.5
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(b)           Increased
by the aggregate amount of the following proceeds actually received by
Purchaser: (i) proceeds from the sale of Hydrocarbons (net of any royalties,
overriding royalties or other burdens on or payable out of Hydrocarbon
production, gathering, processing and transportation costs and any Hydrocarbon
production, severance, sales or excise Taxes not reimbursed to Purchaser by the
purchaser of of Hydrocarbon production) produced from or attributable to the
Properties for periods prior to the Effective Time, and (ii) other proceeds
earned with respect to the Assets for periods prior to the Effective
Time;




(c)           Reduced
to the extent provided in Section 7.7 with respect
to Preference Rights and Retained Assets;




(d)           (i)
If Seller makes the election under Section 3.4(d)(i) (or ifSection 3.4(d)(i) is otherwise implicated by reason of Section 3.4(d)(iv)) with
respect to a Material Title Defect, subject to the Title Defect Deductible,
reduced by the Title Defect Amount with respect to such Material Title Defect
for which the Title Defect Amount has been determined and (ii) subject to the
Title Benefit Deductible, increased by the Title Benefit Amount with respect to
each Material Title Benefit for which the Title Benefit Amount has been
determined;




(e)           Subject
to the Environmental Defect Deductible, reduced by the Environmental Defect
Amount with respect to each Material Environmental Defect if the Environmental
Defect Amount has been determined;




(f)           Increased
by the amount of all Property Costs and other costs attributable to the
ownership and operation of the Assets which are actually paid by Seller and
incurred by Seller (including any overhead costs under Section 1.4 deemed charged to
the Assets with respect to the Adjustment Period even though not actually paid),
except any Property Costs and other such costs already deducted in the
determination of proceeds in Section 2.2(a);




(g)           Reduced
to the extent provided in Section 3.4(d)(iii) for
any Properties excluded from the Assets pursuant to Section 3.4(d)(iii);




(h)           Increased
or reduced as agreed upon in writing by Seller and Purchaser;




(i)           Increased
by the value of the amount of merchantable Hydrocarbons stored in tanks and
pipelines attributable to the ownership and operation of the Assets that belong
to Seller as of the Effective Time (which value shall be computed at the
applicable third-party contract prices for the month of November 2009 for such
stored Hydrocarbons); and




(j)           Reduced
by the actual net aggregate Imbalances, if any, owed by Seller to third-parties,
as of the Effective Time or increased by the actual net aggregate Imbalances, if
any, owed by third parties to Seller as of the Effective Time, in each case
multiplied by a price of $4.47 per MMBtu.




Each
adjustment made pursuant to Section 2.2(a) shall
serve to satisfy, up to the amount of the adjustment, Purchaser’s entitlement to
Hydrocarbon production from or attributable to the


45870756.5
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Properties
during the Adjustment Periods, and to the value of other income, proceeds,
receipts and credits earned with respect to the Assets during the Adjustment
Period, and as such, Purchaser shall not have any separate rights to receive any
Hydrocarbon production or income, proceeds, receipts and credits with respect to
which an adjustment has been made. Similarly, the adjustment described in Section 2.2(f) shall
serve to satisfy, up to the amount of the adjustment, Purchaser’s obligation to
pay Property Costs and other costs attributable to the ownership and operation
of the Assets which are incurred during the Adjustment Period, and as such,
notwithstanding anything in this Agreement to the contrary, Purchaser shall not
be separately obligated to pay for any Property Costs or other such costs with
respect to which an adjustment has been made.




Section
2.3                      Deposit.




On or
before 5:00 p.m. CST on November 27, Purchaser shall have paid to Seller an
earnest money deposit in an amount equal to ten percent (10%) of the Purchase
Price (the “Deposit”).  The Deposit shall be non-interest bearing and
applied against the Purchase Price if the Closing occurs or shall be otherwise
distributed in accordance with the terms of this Agreement.




Section
2.4                      Allocation
of Purchase Price.




On or
before December 31, 2010, Seller shall prepare and deliver to Purchaser a
proposed allocation of the Final Purchase Price among each of the Assets,
consistent with the principles of Section 1060 of the Code and the Treasury
Regulations thereunder.  Seller shall afford Purchaser and its
representatives the opportunity to review such proposed allocation.  Each
party shall cooperate fully and promptly with the other and their respective
representatives in such examination with respect to all reasonable requests
related thereto.  After completion of its review of the proposed allocation
prepared and delivered by Seller and if Purchaser is in agreement with the
proposed allocation of the Final Purchase Price prepared by
Seller, Purchaser and Seller shall use the allocated values as the basis
for reporting asset values and other items for purposes of all federal, state,
and local Tax Returns, including without limitation Internal Revenue Service
Form 8594, if required, or any similar statement of such allocation that may be
required.  After completion of its review of the proposed allocation
prepared and delivered by Seller, if Purchaser disagrees with the proposed
allocation of the Final Purchase Price prepared by Seller, Purchaser and
Seller shall work together in good faith to resolve any disagreed items. 
If Purchaser and Seller are not able to resolve all disagreed items, the parties
will agree to proceed as if the Agreement were silent with respect to an
allocation of the Final Purchase Price among each of the Assets.


.




ARTICLE
3


TITLE
MATTERS




Section
3.1                      Seller’s
Title.




(a)           Except
for the special warranty of title referenced in Section 3.1(b) and
without limiting Purchaser’s right to adjust the Purchase Price by operation of
this Article 3,
Seller


45870756.5
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makes no
warranty or representation, express, implied, statutory or otherwise, with
respect to Seller’s title to any of the Assets, and Purchaser hereby
acknowledges and agrees that the sole remedy for any defect of title, including
any Title Defect, with respect to any of the Assets (i) before Closing, shall be
as set forth in Section
3.4(d) and (ii) after Closing, shall be pursuant to the special warranty
of title referenced in Section 3.1(b).




(b)           The
conveyance covering the Assets to be delivered by Seller to Purchaser shall be
substantially in the form of Exhibits B(the
“Conveyance”).  The Conveyance shall contain a special warranty of
Defensible Title by, through and under Seller and its Affiliates, but not
otherwise, to the Units, and Wells shown on Exhibit A-1, subject to the
Permitted Encumbrances, but shall otherwise be without warranty of title of any
kind, express, implied or statutory or otherwise.




(c)           Purchaser
shall not be entitled to protection under Seller’s special warranty of title in
the Conveyance against any Title Defect reported by Purchaser under Section 3.4(a).




(d)           Notwithstanding
anything herein provided to the contrary, if a Title Defect under this Article 3 results from
any matter which could also result in the breach of any representation or
warranty of Seller set forth in Article 5, then Purchaser
shall only be entitled to assert such matter before Closing as a Title Defect to
the extent permitted by this Article 3, and shall be
precluded from also asserting such matter as the basis of the breach of any such
representation or warranty other than the special warranty of title referenced
in Section
3.1(b).




Section
3.2                      Definition
of Defensible Title.




As used
in this Agreement, the term “Defensible Title” means the title of Seller with
respect to the Units, Wells or other Assets shown in Exhibit A-1 that, except for
and subject to Permitted Encumbrances:




(a)           Entitles
Seller to receive a share of the Hydrocarbons produced, saved and marketed from
any Unit, Well or other Asset shown in Exhibit A-1 throughout the
duration of the productive life of such Unit, Well or other Asset (after
satisfaction of all royalties, overriding royalties, net profits interests or
other similar burdens on or measured by production of Hydrocarbons) (a “Net
Revenue Interest”), of not less than the Net Revenue Interest shown in Exhibit A-1 for such
Unit, Well or other Asset, except (solely to the extent that such actions do not
cause a breach of Seller’s covenants under Section 7.6) for decreases in
connection with those operations in which Seller may from and after the
Effective Time become a non-consenting co-owner, decreases resulting from the
establishment or amendment from and after the Effective Time of pools or units,
decreases in connection with any payouts of non-consent penalties as reflected
in Exhibit A-1, and
decreases required to allow other working interest owners to make up past
underproduction or pipelines to make up past under deliveries, and except as
stated in such Exhibit A-1;




(b)           Obligates
Seller to bear a percentage of the costs and expenses for the maintenance and
development of, and operations relating to, (i) any Unit, Well or other Asset
shown in Exhibit A-1 not
greater than the “working interest” shown in Exhibit A-1 for such Unit,
Well or other Asset without increase throughout the productive life of such
Unit, Well or


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other
Asset, except as stated in Exhibit A-1 and except for increases
resulting from contribution requirements with respect to non-consenting
co-owners under applicable operating agreements and increases that are
accompanied by at least a proportionate increase in Seller’s Net Revenue
Interest; and




(c)           Is
free and clear of liens, encumbrances, obligations, security interests,
irregularities, pledges, or other defects (other than Permitted
Encumbrances).




(d)           As
used in this Agreement, the term “Title Defect” means any lien, charge,
encumbrance, obligation (including contract obligation), defect, or other matter
(including without limitation a discrepancy in Net Revenue Interest or working
interest) that causes Seller not to have Defensible Title in and to the Units,
Wells or other Assets shown on Exhibit A-1 as of the
Effective Time and the Closing. As used in this Agreement, the term “Title
Benefit” shall mean any right, circumstance or condition that operates to
increase the Net Revenue Interest of Seller in any Unit, Well or other Asset
shown on Exhibit A-1,
without causing a greater than proportionate increase in Seller’s working
interest above that shown in Exhibit A-1 as of the
Effective Time. Notwithstanding the foregoing, the following shall not be
considered Title Defects:




(i)
            defects
      based solely on (1) lack of information in Seller’s files, or (2)
      references to a document(s) if such document(s) is not in Seller’s
      files;




(ii)
            defects
      arising out of lack of corporate or other entity authorization unless
      Purchaser provides affirmative evidence that the action was not authorized
      and results in another Person’s superior claim of title to the relevant
      Asset;




(iii)
            defects
      based on failure to record Leases issued by any state or federal
      Governmental Body, or any assignments of such Leases, in the real
      property, conveyance or other records of the county or parish in which
      such Property is located (provided such Leases are recorded in the state
      or federal records in a manner sufficient to provide adequate notice
      thereof);




(iv)
            defects
      that have been cured by applicable Laws of limitation or
      prescription;




(v)
            defects
      arising out of a lack of survey, unless a survey is expressly required by
      applicable Laws; and




(vi)
            defects
      disclosed herein (including on any Schedule or Exhibit hereto; provided
      that to the extent such disclosure is contained on Exhibit “A” Leases it
      must be express and not simply implied based on the listing of the Lease
      itself).




Section
3.3                      Definition
of Permitted Encumbrances.




As used
herein, the term “Permitted Encumbrances” means any or all of the
following:




(a)           Royalties
and any overriding royalties, reversionary interests and other burdens on
production, to the extent that any such burden does not reduce Seller’s Net
Revenue Interest  45870756.5
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below
that shown in Exhibit A-1 or increase
Seller’s working interest above that shown in Exhibit A-1 without a
proportionate increase in the Net Revenue Interest;




(b)           All
Leases, unit agreements, pooling agreements, operating agreements, Hydrocarbon
production sales contracts, division orders and other contracts, agreements and
instruments applicable to the Assets, to the extent that they do not,
individually or in the aggregate, (i) reduce Seller’s Net Revenue Interest below
that shown in Exhibit A-1 or increase
Seller’s working interest above that shown in Exhibit A-1 without a
proportionate increase in the Net Revenue Interest, and (ii) interfere in any
material respect with the use, ownership or operation of, the Assets subject
thererto or affected thereby (as currently used, owned or
operated);




(c)           Preference
Rights applicable to this or any future transaction disclosed in Schedule 7.7;




(d)           Transfer
Requirements applicable to this or any future transaction disclosed in Schedule 7.7;




(e)           Liens
for current Taxes or assessments not yet delinquent or, if delinquent, are
identified on Schedule 5.8as being contested in good faith in the normal course of
business;




(f)Materialman’s, mechanic’s,
repairman’s, employee’s, contractor’s, operator’s and other similar liens or
charges arising in the ordinary course of business for amounts not yet
delinquent (including any amounts being withheld as provided by
Law);




(g)           All
rights to consent by, required notices to, filings with, or other actions by
Governmental Bodies in connection with the sale or conveyance of the Assets or
interests therein pursuant to this or to any future transaction if they are not
required or customarily obtained prior to the sale or conveyance;




(h)           Rights
of reassignment arising upon final intention to abandon or release the Assets,
or any of them;




(i)Easements,
rights-of-way, servitudes, permits, surface leases and other rights in respect
of surface operations, to the extent that they do not (i) reduce Seller’s Net
Revenue Interest below that shown in Exhibit A-1, (ii)
increase Seller’s working interest above that shown in Exhibit A-1 without a
proportionate increase in Net Revenue Interest, or (iii) detract in any material
respect from the value of, or interfere in any material respect with the use,
ownership or operation of, the Assets subject thereto or affected thereby (as
currently used, owned and operated) and which would be acceptable by a
reasonably prudent purchaser engaged in the business of owning and operating oil
and gas properties;




(j)           Calls
on Hydrocarbon production under existing Contracts that are listed on Schedule 1.2(d);




(k)           All
rights reserved to or vested in any Governmental Body to control or regulate any
of the Assets in any manner, and all obligations and duties under all applicable
Laws or under any franchise, grant, license or permit issued by any such
Governmental Body;


45870756.5
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(l)Any encumbrance on
or affecting the Assets which is discharged by Seller at or prior to
Closing;




(m)          Any
matters shown on Schedule
3.3(m);




(n)           Any
other liens, charges, encumbrances, defects or irregularities which do not,
individually or in the aggregate, detract in any material respect from the value
of, or interfere in any material respect with the use or ownership of, the
Assets subject thereto or affected thereby (as currently used or owned), which
would be accepted by a reasonably prudent purchaser engaged in the business of
owning and operating oil and gas properties, and which do not reduce Seller’s
Net Revenue Interest below that shown in Exhibit A-1, or increase
Seller’s working interest above that shown in Exhibit A-1 without a
proportionate increase in Net Revenue Interest;




(o)           Matters
that would otherwise be considered Title Defects but that do not meet the
Individual Title Threshold set forth in Section 3.4(j);




(p)           Imbalances
associated with the Assets;




(q)           Liens
granted under applicable standard joint operating agreements; and




(r)           
Such Title Defects as Purchaser may have waived expressly in
writing.




Section
3.4                      Notice of
Title Defect Adjustments.




(a)           To
assert a claim of a Title Defect prior to Closing, Purchaser must deliver claim
notices to Seller (each a “Title Defect Notice”) on or before January 18, 2009
(the “Title Claim Date”); provided, however, that Purchaser agrees that it
shall  use commercially reasonable efforts to furnish Seller periodic
preliminary notices of  any alleged Title Defect(s) discovered by
Purchaser.  Each Title Defect Notice shall be in writing and shall
include (i) a description of the alleged Title Defect(s), (ii) the Units, Wells
or other Assets in Exhibit
A-1 affected by the Title Defect (each a “Title Defect Property”), (iii)
the Allocated Value of each Title Defect Property, (iv) supporting documents
reasonably necessary for Seller (as well as any title attorney or examiner hired
by Seller) to verify the existence of the alleged Title Defect(s), and (v) the
amount by which Purchaser reasonably believes the Allocated Value of each Title
Defect Property is reduced by the alleged Title Defect(s) and the computations
and information upon which Purchaser’s belief is based. Notwithstanding any
other provision of this Agreement to the contrary, but subject to Purchaser’s
rights in connection with the special warranty of title referenced in Section 3.1(b), Purchaser
shall be deemed to have waived its right to assert Title Defects of which Seller
has not been given notice on or before the Title Claim Date.  For
purposes hereof, the “Allocated Value” of an Asset shall mean the portion of the
Purchase Price that has been allocated to a particular Unit or Well in Schedule 3.4(a).




(b)           Seller
shall have the right, but not the obligation, to deliver to Purchaser on or
before the Title Claim Date, with respect to each Title Benefit, a notice (a
“Title Benefit Notice”) including (i) a description of the Title Benefit, (ii)
the Units, Wells or other Assets in Exhibit A-1 affected, (iii)
the Allocated Values of the Units, Wells or other Assets in Exhibit A-1 subject to such
Title Benefit and (iv) the amount by which Seller reasonably believes the
Allocated


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Value of
those Units, Wells or other Assets is increased by the Title Benefit, and the
computations and information upon which Seller’s belief is based. Seller shall
be deemed to have waived all Title Benefits of which it has not given notice to
Purchaser on or before the Title Claim Date.




(c)           Seller
shall have the right, but not the obligation, to attempt, at its sole cost, to
cure or remove at any time prior to Closing (the “Cure Period”), unless the
parties otherwise agree, any Title Defects of which it has been advised in
writing by Purchaser.




(d)           In the event that any Title Defect is
not waived by Purchaser or cured on or before Closing, subject to the parties’
rights underSection
3.4(i), Purchaser and
Seller shall mutually elect to have one of the following remedies
apply:






(i)
            subject
      to the Individual Title Threshold and the Title Defect Deductible, have
      the Purchase Price reduced by an amount agreed upon ("Title Defect
      Amount") pursuant to Section 3.4(g) by
      Purchaser and Seller as being the value of such Title Defect, taking into
      consideration the Allocated Value of the Property subject to such Title
      Defect, the portion of the Property subject to such Title Defect and the
      legal effect of such Title Defect on the Property affected thereby;
      provided, however, that the methodology, terms and conditions of Section 3.4(g)
      shall control any such
determination;






(ii)
            indemnify
      Purchaser against all liability, loss, cost and expense resulting from
      such Title Defect pursuant to an indemnity agreement (the "Indemnity
      Agreement") in the form attached hereto as Exhibit C;




(iii)
            have
      Seller retain the entirety of the Property that is subject to such Title
      Defect, together with all associated Assets, in which event the Purchase
      Price shall be reduced by an amount equal to the Allocated Value of such
      Property; or





(iv)
            at
      Closing, have Purchaser deposit into escrow the full Allocated Value of
      the Property that is subject to such Title Defect.  Seller shall
      then have 180 days after Closing in which to cure the Title
      Defect.  Any Property so held back from the initial Closing will
      be conveyed to Purchaser at a delayed Closing within ten (10) days
      following the date that the Title Defect is cured, at which time Seller
      shall be entitled to withdraw the full Allocated Value of the Property
      from escrow, and provided further that if multiple delayed Closings are
      contemplated as a result of this provision and/or Section 7.7(c), the
      delayed Closings may be consolidated on dates mutually agreeable to the
      parties.  In the event that Seller is unable to cure the Title
      Defect within 180 days of the initial Closing, then the remedy set forth
      in subsection (i) shall be the sole remedy for such Title
      Defect.  All other provisions of Section 3.4(i) shall
      apply as written and the Title Expert shall be selected within fifteen
      (15) Business Days of the end of the 180 day cure
  period.




In the
event that Purchaser and Seller cannot mutually agree upon one of the foregoing
remedies with respect to a Title Defect asserted by Purchaser pursuant to Section 3.4(a) prior
to


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Closing,
then Seller shall, at its sole election, select the remedy set forth in
subsection (i), (iii) or (iv) above as the remedy for such Title
Defect.




(e)           With
respect to each Unit, Well or other Asset in Exhibit A-1 affected by Title
Benefits reported under Section
3.4(b), subject to the Individual Benefit Threshold and the Title Benefit
Deductible, the Purchase Price shall be increased by an amount (the “Title
Benefit Amount”) equal to the increase in the Allocated Value for such Unit,
Well or other Asset in Exhibit
A-1 caused by such Title Benefits, as determined pursuant to Section 3.4(h).




(f)           Section 3.4(d) shall be the
exclusive right and remedy of Purchaser with respect to Title Defects asserted
by Purchaser pursuant to Section
3.4(a).  Section 3.4(e) shall be the
exclusive right and remedy of Seller with respect to Title Benefits asserted by
Seller pursuant to Section
3.4(b).




(g)           The
Title Defect Amount resulting from a Title Defect shall be the amount by which
the Allocated Value of the Title Defect Property is reduced as a result of the
existence of such Title Defect and shall be determined in accordance with the
following methodology, terms and conditions:




(i)
            if
      Purchaser and Seller agree on the Title Defect Amount, that amount shall
      be the Title Defect Amount;




(ii)
            if
      the Title Defect is a lien, encumbrance or other charge which is
      undisputed and liquidated in amount, then the Title Defect Amount shall be
      the amount necessary to be paid to remove the Title Defect from the Title
      Defect Property;




(iii)
            if
      the Title Defect represents a discrepancy between (A) the Net Revenue
      Interest for any Title Defect Property and (B) the Net Revenue Interest
      stated on Exhibit A-1, then
      the Title Defect Amount shall be the product of the Allocated Value of
      such Title Defect Property multiplied by a fraction, the numerator of
      which is the Net Revenue Interest decrease and the denominator of which is
      the Net Revenue Interest stated on Exhibit A-1;




(iv)
            if
      the Title Defect represents an obligation, encumbrance, burden or charge
      upon or other defect in title to the Title Defect Property of a type not
      described in subsections (i), (ii) or (iii) above, the Title Defect
      Amount shall be determined by taking into account the Allocated Value of
      the Title Defect Property, the portion of the Title Defect Property
      affected by the Title Defect, the legal effect of the Title Defect, the
      potential economic effect of the Title Defect over the life of the Title
      Defect Property, the values placed upon the Title Defect by Purchaser and
      Seller and such other factors as are necessary to make a proper
      evaluation; provided, however, that if such Title Defect is reasonably
      capable of being cured, the Title Defect Amount shall not be greater than
      the reasonable cost and expense of curing such Title
    Defect;




45870756.5
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(v)
            if
      (A) the Title Defect Property is not a Well (or specified zone(s) therein,
      (B) such title Defect Property does not have an Allocated Value, (C) the
      Title Defect with respect to such Title Defect Property causes a loss of
      title to such Title Defect Property and (D) the loss of such title to such
      Title Defect Property will prevent the continued operation or production
      of a Well (or one or more specified zone(s) therein) shown in Exhibit A-1 (such Well
      or the specified zone(s) therein being referred to as the “Affected Well”)
      and the other Assets are not capable of providing an alternative means to
      support, in all material respects, the continued operation or production
      of the Affected Well, then such Title Defect Property (a “Defective
      Support Property”) and such Affected Well(s) shall collectively be
      considered a single Title Defect Property for purposes of this Section 3.4(g); provided, however, that
      the Title Defect Amount resulting from the Title Defect affecting such
      Defective Support Property shall be the lesser of (1) the reasonable cost
      to replace such Defective Support Property, if such Defective Support
      Property is reasonably capable of being replaced, (2) the reasonable cost
      of providing an alternative means to support in all material respects the
      continued operation or production of the Affected Well, or (3) the Title
      Defect Amount that would otherwise be applicable to such Title Defect
      under this Section
      3.4(g);




(vi)
            the
      Title Defect Amount with respect to a Title Defect Property shall be
      determined without duplication of any costs or losses included in another
      Title Defect Amount hereunder; and




(vii)
            notwithstanding
      anything to the contrary in this Article 3, the
      aggregate Title Defect Amounts attributable to the effects of all Title
      Defects upon any Title Defect Property shall not exceed the Allocated
      Value of the Title Defect Property.




(h)                      Title Benefit
Amount.  The Title Benefit Amount resulting from a Title
Benefit shall be determined in accordance with the following methodology, terms
and conditions:




(i)           if
Purchaser and Seller agree on the Title Benefit Amount, then that amount shall
be the Title Benefit Amount; and




(ii)           if
the Title Benefit represents a benefit in title of a type not described above,
the Title Benefit Amount shall be determined by taking into account the
Allocated Value of the affected property, the portion of the subject property
affected by the Title Benefit, the legal effect of the Title Benefit, the
potential economic effect of the Title Benefit over the life of the subject
property, the values placed upon the Title Benefit by Purchaser and Seller and
such other reasonable factors as are necessary to make a proper
evaluation.


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(i)           Seller
and Purchaser shall attempt in good faith to agree on all Title Defects, Title
Benefits, Title Defect Amounts and Title Benefit Amounts prior to
Closing.  If Seller and Purchaser are unable to agree by Closing, the
Title Defects, Title Benefits, Title Defect Amounts and Title Benefit Amounts in
dispute shall be exclusively and finally resolved by arbitration pursuant to
this Section 3.4(i).
There shall be a single arbitrator, who shall be a title attorney with at least
ten (10) years experience in oil and gas titles involving properties in the
regional area in which the Properties are located, as selected by mutual
agreement of Purchaser and Seller within fifteen (15) Business Days after the
end of the Cure Period, and absent such mutual agreement, by the Dallas office
of the American Arbitration Association (the “Title Arbitrator”). The
arbitration proceeding shall be held in Dallas, Texas and shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, to the extent such rules do not conflict with the terms of this
Section. The Title Arbitrator’s determination shall be made within fifteen (15)
Business Days after submission of the matters in dispute and shall be final and
binding upon both parties, without right of appeal. In making his determination,
the Title Arbitrator shall be bound by the rules set forth in Section 3.4(g) and Section 3.4(h) and may
consider such other matters as in the opinion of the Title Arbitrator are
necessary or helpful to make a proper determination. Additionally, the Title
Arbitrator may consult with and engage disinterested third parties to advise the
arbitrator, including without limitation petroleum engineers.  The
Title Arbitrator shall act as an expert for the limited purpose of determining
the specific disputed Title Defects, Title Benefits, Title Defect Amounts and
Title Benefit Amounts submitted by either party and may not award damages,
interest or penalties to either party with respect to any matter. Seller and
Purchaser shall each bear its own legal fees and other costs of presenting its
case.  Each party shall bear one-half of the costs and expenses of the
Title Arbitrator, including any costs incurred by the Title Arbitrator that are
attributable to such third party consultation.  Within ten (10) days
after the Title Arbitrator delivers written notice to Purchaser and Seller of
his award with respect to a Title Defect Amount or a Title Benefit Amount, (i)
Purchaser shall pay to Seller the amount, if any, so awarded by the Title
Arbitrator to Seller, plus interest payable on such amount at the Agreed
Interest Rate from (but not including) the Closing Date to (and including) the
date on which such amount is paid to Seller and (ii) Seller shall pay to
Purchaser the amount, if any, so awarded by the Title Arbitrator to Purchaser,
plus interest payable on such amount at the Agreed Interest Rate from (but not
including) the Closing Date to (and including) the date on which such amount is
paid to Purchaser.




(j)           Notwithstanding
anything to the contrary, (i) in no event shall there be any adjustments to the
Purchase Price or other remedies provided by Seller for any individual uncured
Title Defect for which the Title Defect Amount therefor does not exceed $50,000
(“Individual Title Threshold”); and (ii) in no event shall there be any
adjustments to the Purchase Price or other remedies provided by Seller for
uncured Title Defects unless the aggregate Title Defect Amounts attributable to
all uncured Material Title Defects exceeds a deductible in an amount equal to
Two and One-Half Percent (2.5%) of the Purchase Price (the “Title Defect
Deductible”), after which point adjustments to the Purchase Price or other
remedies shall be made or available to Purchaser only to the extent the
aggregate Title Defect Amounts with respect to uncured Material Title Defects
are in excess of such Title Defect Deductible.  Notwithstanding
anything to the contrary, (i) in no event shall there be any adjustments to the
Purchase Price for any individual Title Benefit for which the Title Benefit
Amount does not exceed $50,000 (“Individual Benefit Threshold”); and (ii) in no
event shall there be any


45870756.5
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adjustments
to the Purchase Price for any Title Benefit unless (i) the excess of the
aggregate Title Benefit Amounts attributable to all Material Title Benefits
exceeds a deductible in an amount equal to Two and One-Half Percent (2.5%) of
the Purchase Price (“Title Benefit Deductible”), after which point adjustments
to the Purchase Price shall be made only to the extent the aggregate Title
Benefit Amounts with respect to such Material Title Benefits exceed the Title
Benefit Deductible.




Section
3.5                      Casualty
or Condemnation Loss.




(a)           Notwithstanding
anything herein to the contrary, from and after the Effective Time, but subject
to the provisions of Section
3.5(b) and (c) and below, Purchaser shall assume all risk of loss with
respect to and any change in the condition of the Assets and for production of
Hydrocarbons through normal depletion (including but not limited to the watering
out of any Well, collapsed casing or sand infiltration of any Well) and the
depreciation of personal property due to ordinary wear and tear with respect to
the Assets.




(b)           If,
after the date of this Agreement but prior to the Closing Date, any portion of
the Assets is destroyed by fire or other casualty or is taken in condemnation or
under right of eminent domain, and the aggregate amount of any such loss or
taking exceeds Twenty Percent (20%) of the Purchase Price, either party shall
have the right to terminate this Agreement and Purchaser shall promptly receive
back the Deposit.  If the aggregate amount of any such loss or taking
is Twenty Percent (20%) or less of the Purchase Price, Purchaser shall be
required to close.  If the loss as a result of such individual
casualty or taking exceeds $25,000 and the parties proceed to Closing, Seller
and Buyer shall elect either (i) to cause the Assets affected by such casualty
or taking to be repaired or restored to at least its condition prior to such
casualty or taking, at Seller’s sole cost, as promptly as reasonably practicable
(which work may extend after the Closing Date), or (ii) to indemnify Purchaser
through a document reasonably acceptable to Seller and Purchaser against any
costs or expenses that Purchaser reasonably incurs to repair the Assets subject
to such casualty or taking or (iii) remove the affected Assets from the Closing
and reduce the Purchase Price by the Allocated Value associated with the removed
Assets,or (iv)
Seller, at Closing, shall pay to Purchaser all sums paid or payable to Seller by
Third Parties by reason of such casualty or taking insofar as with respect to
the Assets and shall assign, transfer and set over to Purchaser or subrogate
Purchaser to all of Seller’s right, title and interest (if any) in insurance
claims, unpaid awards and other rights against Third Parties (excluding any
Liabilities, other than insurance claims, of or against any Seller Indemnified
Parties) arising out of such casualty or taking insofar as with respect to the
Assets; provided,
however, that in the case of (iv), Seller shall reserve and retain (and
Purchaser shall assign to Seller) all rights, title, interests and claims
against Third Parties for the recovery of Seller’s costs and expenses incurred
prior to the Closing Date in pursuing or asserting any such insurance claims or
other rights against Third Parties or in defending or asserting rights in such
condemnation or eminent domain action with respect to the Assets.  In
the case of (i) - (iii), Seller shall retain all rights to insurance,
condemnation awards and other claims against third parties with respect to the
casualty or taking except to the extent the parties otherwise agree in
writing.  If Seller and Purchaser are unable to agree on one of the
foregoing remedies prior to Closing, then clause (iii) shall apply.


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(c)           If
any action for condemnation or taking under right of eminent domain is pending
or threatened with respect to any Asset or portion thereof after the date of
this Agreement, but no taking of such Asset or portion thereof occurs prior to
the Closing Date, Purchaser shall nevertheless be required to close and Seller,
at Closing, shall assign, transfer and set over to Purchaser or subrogate
Purchaser to all of Seller’s right, title and interest (if any) in such
condemnation or eminent domain action, including any future awards therein,
insofar as they are attributable to the Assets threatened to be taken, except
that Seller shall reserve and retain (and Purchaser shall assign to Seller) all
rights, titles, interests and claims against Third Parties for the recovery of
Seller’s costs and expenses incurred prior to the Closing in defending or
asserting rights in such action with respect to the Assets.




Section
3.6                      Limitations
on Applicability.




Subject
to the following sentence, the right of Purchaser to assert a Title Defect under
this Agreement shall terminate as of the Title Claim Date, provided there shall
be no termination of Purchaser’s or Seller’s rights under Section 3.4 with respect
to any bona fide Title Defect properly reported in a Title Defect Notice or bona
fide Title Benefit Claim properly reported in a Title Benefit Notice on or
before the Title Claim Date. Thereafter, Purchaser’s sole and exclusive rights
and remedies with regard to title to the Assets shall be as set forth in, and
arising under, the Conveyance transferring the Assets from Seller to
Purchaser.




ARTICLE
4


ENVIRONMENTAL
MATTERS




Section
4.1                      Assessment.




(a)           From
and after the date hereof and up to and including the Closing Date (or earlier
termination of this Agreement) but subject to (i) applicable Laws, (ii) the
other provisions of this Section 4.1 and (iii)
obtaining any required consents of Third Parties, including Third Party
operators of the Assets (with respect to which consents Seller shall use
commercially reasonable efforts to obtain), Seller shall afford to Purchaser and
its officers, employees, agents, accountants, attorneys, investment bankers and
other authorized representatives (“Purchaser’s Representatives”) full access,
during normal business hours and upon reasonable notice, to the Assets and all
Records and other documents in Seller’s or any their respective Affiliates’
possession relating primarily to the Assets.  Seller shall also make
available to Purchaser and Purchaser’s Representatives, upon reasonable notice
during normal business hours, Seller’s personnel knowledgeable with respect to
the Assets in order that Purchaser may make such diligence investigation as
Purchaser considers necessary or appropriate.  All investigations and
due diligence conducted by Purchaser or any Purchaser’s Representative shall be
conducted at Purchaser’s sole cost, risk and expense and any conclusions made
from any examination done by Purchaser or any Purchaser’s Representative shall
result from Purchaser’s own independent review and judgment.




(b)           Upon
reasonable notice to Seller, Purchaser shall have the right to conduct an
environmental assessment of all or any portion of the Properties (the
"Assessment"), to be conducted by Purchaser or Purchaser’s agent, consultant or
contractor (provided Seller


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shall be
provided with written notice identifying any such agent, consultant or
contractor), but only to the extent that Seller may grant such right without
violating any obligations to any third party (provided that Seller shall use its
commercially reasonable efforts to obtain any necessary third party consents to
any Assessment to be conducted by Purchaser). The Assessment shall be conducted
at the sole cost and expense of Purchaser, and shall be subject to the indemnity
provisions of Section 4.4. Prior to
conducting any sampling, boring, drilling or other invasive investigative
activity with respect to the Properties ("Invasive Activity"), Purchaser shall
furnish for Seller's review a proposed scope of such Invasive Activity,
including a description of the activities to be conducted and a description of
the approximate locations of such activities. If any of the proposed activities
may unreasonably interfere with normal operation of the Properties, Seller may
require an appropriate modification of the proposed Invasive Activity. Seller
shall have the right to be present during any Assessment of the Properties and
shall have the right, at its option and expense, to split samples with
Purchaser.




(c)           
Notwithstanding anything herein to the contrary, Purchaser shall not have access
to, and shall not be permitted to conduct any environmental due diligence with
respect to any Assets where Seller does not have the authority to grant access
for such due diligence; provided, however, Seller
shall use its commercially reasonable efforts to obtain permission from any
Third Party operator to allow Purchaser and Purchaser’s Representatives such
access, it being understood by Purchaser that the execution by Purchaser of a
customary access agreement may be a condition of such access.




(d)           Purchaser
shall coordinate its environmental site assessments and physical inspections of
the Assets with Seller to minimize any inconvenience to or interruption of the
conduct of business by Seller.  Purchaser shall abide by Seller’s, and
any Third Party operator’s, safety rules, regulations and operating policies
while conducting its due diligence evaluation of the Assets including any
environmental or other inspection or assessment of the Assets.




(e)           Upon
completion of Purchaser’s due diligence, Purchaser shall at its sole cost and
expense and without any cost or expense to Seller or its Affiliates, (i) repair
all damage done to the Assets in connection with Purchaser’s due diligence in
accordance with recognized industry standards or requirements of Third Party
operators, (ii) restore the Assets to the approximate same or better condition
than existed prior to commencement of Purchaser’s due diligence, to the full
extent of any damage related to Purchaser’s due diligence, and (iii) remove all
equipment, tools or other property brought onto the Assets in connection with
Purchaser’s due diligence.  Any disturbance to the Assets (including,
without limitation, any real property, platform or other fixtures associated
with such Assets) resulting from Purchaser’s due diligence will be promptly
corrected by Purchaser.




(f)           During
all periods that Purchaser, and/or any of Purchaser’s Representatives are on the
Assets, Purchaser shall maintain, at its sole expense insurance that is
reasonable and customary in the industry..  Purchaser shall provide
evidence of such insurance to Seller prior to entering upon the
Assets.


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(g)           All
information obtained by Purchaser and its representatives pursuant to this Section 4.1 shall be subject
to the terms of that certain confidentiality agreement dated September 24, 2009,
but effective as of October 8, 2009, by and between Merit Energy Company, LLC
and Purchaser (the “Confidentiality Agreement”); provided that Purchaser is
permitted to disclose the proposed acquisition and any details relating thereto
to any Governmental Bodies as reasonably necessary to allow Purchaser to conduct
its due diligence hereunder (although nothing herein shall be construed as
permitting Purchaser to disclose any results from any such due diligence without
Seller’s prior written consent).




Section
4.2                      NORM,
Wastes and Other Substances.




Purchaser
acknowledges that the Assets have been used for the exploration, development,
and production of Hydrocarbons and that there may be petroleum, produced water,
wastes, or other substances or materials located in, on or under the Properties
or associated with the Assets.  Equipment and sites included in the
Assets may contain Hazardous Materials, including NORM.  NORM may
affix or attach itself to the inside of wells, materials, and equipment as
scale, or in other forms.  The wells, materials, and equipment located
on the Properties or included in the Assets may contain Hazardous Materials,
including NORM.  Hazardous Materials, including NORM, may have come in
contact with various environmental media, including without limitation, water,
soils or sediment.  Special procedures may be required for the
assessment, remediation, removal, transportation, or disposal of environmental
media and Hazardous Materials, including NORM, from the Assets.




Section
4.3                      Environmental
Defects.




If, as a
result of its investigation pursuant to Section 4.1, Purchaser
determines that with respect to the Assets, there exists a violation of an
Environmental Law (other than with respect to NORM and other than with respect
to any issues disclosed herein or on any Exhibit or Schedule hereto or any other
matter with respect to which Purchaser has knowledge prior to entering into this
Agreement) (in each case, an “Environmental Defect”), then on or prior to
January 18, 2009 (the “Environmental Claim Date”), Purchaser may notify Seller
in writing of such Environmental Defect (an “Environmental Defect
Notice”).  For all purposes of this Agreement, Purchaser shall be
deemed to have waived any Environmental Defect which Purchaser fails to assert
as an Environmental Defect by an Environmental Defect Notice received by Seller
on or before the Environmental Claim Date.  To be effective, each such
notice shall set forth (i) a description of the matter constituting the alleged
Environmental Defect, (ii) the Units/Wells and associated Assets affected by the
Environmental Defect, (iii) the estimated Lowest Cost Response to eliminate the
Environmental Defect in question (the “Environmental Defect Amount”), and (iv)
supporting documents reasonably necessary for Seller to verify the existence of
the alleged Environmental Defect and the Environmental Defect
Amount.  Purchaser shall use commercially reasonable efforts to
furnish Seller periodic preliminary notices of any alleged Environmental Defect
discovered by Purchaser.  Seller shall have the right, but not the
obligation, to cure any Environmental Defect before Closing or, provided that
the parties shall have agreed to the general plan of remediation with respect to
such Environmental Defect and the time period by which such remediation shall
take place, after Closing.  If Seller disagrees with any of
Purchaser’s assertions with respect to the existence of an Environmental Defect
or the


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Environmental
Defect Amount, Purchaser and Seller will attempt to resolve the dispute prior to
Closing.  If the dispute cannot be resolved within ten (10) days of
the first meeting of Purchaser and Seller, either party may submit the dispute
to an environmental consultant approved in writing by Seller and Purchaser that
is experienced in environmental corrective action at oil and gas properties in
the relevant jurisdiction and that shall not have performed professional
services for either party or any of their respective Affiliates during the
previous five years (the “Independent Expert”).  The Independent
Expert may elect to conduct the dispute resolution proceeding by written
submissions from Purchaser and Seller with exhibits, including interrogatories,
supplemented with appearances by Purchaser and Seller, if necessary, as the
Independent Expert may deem necessary.  After the parties and
Independent Expert have had the opportunity to review all such submissions, the
Independent Expert shall call for a final, written offer of resolution from each
party.  The Independent Expert shall render its decision within twenty
(20) Business Days of receiving such offers by selecting one or the other of the
offers. The Independent Expert may not award damages, interest or penalties to
either party with respect to any matter.  The decision of the
Independent Expert shall be final and binding upon both parties, without right
of appeal.  Seller and Purchaser shall each bear its own legal fees
and other costs of presenting its case to the Independent Expert. Each party
shall bear one-half of the costs and expenses of the Independent
Expert.  The parties shall adjust the Purchase Price to reflect the
Environmental Defect Amounts, as agreed by the parties or as determined by the
Independent Expert, for all uncured Environmental Defects; provided, that
notwithstanding anything to the contrary, (a) in no event shall there be any
adjustments to the Purchase Price for any individual uncured Environmental
Defect for which the Environmental Defect Amount therefor does not exceed
$50,000 (“Individual Environmental Threshold”); and (b) in no event shall there
be any adjustments to the Purchase Price for any uncured Environmental Defect
unless the aggregate Environmental Defect Amount attributable to all Material
Environmental Defects exceeds the Two and One-Half Percent (2.5%) of the
Purchase Price (the “Environmental Defect Deductible”), after which point
Purchaser shall be entitled to adjustments to the Purchase Price or other
remedies only to the extent the aggregate Environmental Defect Amounts with
respect to all uncured Material Environmental Defects are in excess of such
Environmental Defect Deductible.  To the extent the Independent Expert
fails to determine any disputed Environmental Defect Amounts prior to Closing,
then, within ten (10) days after the Independent Expert delivers written notice
to Purchaser and Seller of his award with respect to an Environmental Defect
Amount, Seller shall pay to Purchaser the amount, if any, so awarded by the
Independent Examiner, plus interest payable on such amount at the Agreed
Interest Rate from (but not including) the Closing Date to (and including) the
date on which such amount is paid to Purchaser.




Section
4.4                      Inspection
Indemnity.




Purchaser
hereby agrees to defend, indemnify and hold harmless each of the Third Party
operators and owners of the Assets and Seller Indemnified Parties from and
against any and all Liabilities arising out of, resulting from or relating to
any field visit, environmental property assessment, or other due diligence
activity conducted by Purchaser or any Purchaser’s Representative with respect
to the Assets, even if such Liabilities arise out of or result from, solely or
in part, the sole, active, passive, concurrent or comparative negligence, strict
liability or other fault or violation of Law of or by any such Third Party
operator or owner or Seller


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Indemnified
Party, excepting only Liabilities actually resulting on the account of the gross
negligence or willful misconduct of such person.




Section
4.5                      Exclusive
Remedy.




Subject
to the limitations contained therein, Section 5.12and Section 4.3 shall be the
exclusive right and remedy of Purchaser with respect to any Environmental
Defect.  Purchaser hereby waives any claims of cost recovery or
contribution from Seller or its Affiliates related to the Assets under any
Environmental Law or other cause of action.  Notwithstanding anything
herein provided to the contrary, if an Environmental Defect under this Article 4 results from
any matter which could also result in the breach of any representation or
warranty of Seller set forth in Article 5, then Purchaser
shall only be entitled to assert such matter (i) before Closing, as an
Environmental Defect to the extent permitted by this Article 4, and shall be
precluded from also asserting such matter as the basis of the breach of any such
representation or warranty, and (ii) after Closing, in accordance with and
subject to the limitations of Article 11 (provided that
nothing herein shall be construed as permitting Purchaser to assert an
Environmental Defect after the Environmental Claim Date unless such matter is
being raised solely as a breach of the Representation in Section 5.12 and only to the
extent such matter constitutes a breach thereunder.




ARTICLE
5


REPRESENTATIONS
AND WARRANTIES OF SELLER




Section
5.1                      Generally.




(a)           Any
representation or warranty qualified “to the knowledge of Seller” or “to
Seller’s knowledge” or with any similar knowledge qualification is limited to
matters within the actual knowledge of the officers of Seller or its Affiliates
or those employees of Seller or any of its Affiliates who have responsibility
for the Assets and who have the following titles:  General Manager –
South Division.  “Actual knowledge” for purposes of this Agreement
means information actually personally known by such Persons.




(b)           Inclusion
of a matter on a Schedule in relation to a representation or warranty which
addresses matters having a Material Adverse Effect shall not be deemed an
indication that such matter does, or may, have a Material Adverse Effect.
Likewise, the inclusion of a matter on a Schedule in relation to a
representation or warranty shall not be deemed an indication that such matter
necessarily would, or may, breach such representation or warranty absent its
inclusion on such Schedule. Matters may be disclosed on a Schedule to this
Agreement for purposes of information only.




(c)           Subject
to the foregoing provisions of this Section 5.1, the
disclaimers and waivers contained in Sections 11.8, 11.9 and 11.10 and the other terms and
conditions of this Agreement, Seller represents and warrants to Purchaser the
matters set out in the remainder of this Article 5.


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Section
5.2                      Existence
and Qualification.




Each
entity comprising Seller is either a limited partnership or a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware and is duly qualified to do business as a foreign
corporation  where the Assets are located, except where the failure to
so qualify would not have a Material Adverse Effect.




Section
5.3                      Power.




Seller
has the power and authority to enter into and perform this Agreement and
consummate the transactions contemplated by this Agreement.




Section
5.4                      Authorization
and Enforceability.




The
execution, delivery and performance of this Agreement, and the performance of
the transactions contemplated hereby, have been duly and validly authorized by
all necessary limited partnership or limited liability company action (as
applicable) on the part of Seller. This Agreement has been duly executed and
delivered by Seller (and all documents required hereunder to be executed and
delivered by Seller at Closing will be duly executed and delivered by Seller)
and this Agreement constitutes, and at the Closing such documents will
constitute, the valid and binding obligations of Seller, enforceable against
Seller in accordance with their terms except as such enforceability may be
limited by applicable bankruptcy or other similar laws affecting the rights and
remedies of creditors generally as well as to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at Law).




Section
5.5                      No
Conflicts.




Subject
to the giving of all notices to Third Parties and the receipt of all consents,
approvals and waivers from Third Parties in connection with the transactions
contemplated hereby, the execution, delivery and performance by Seller of this
Agreement and the consummation of the transactions contemplated herein will not
(i) conflict with or result in a breach of any provisions of the organizational
documents of Seller, (ii) result in a default or the creation of any encumbrance
or give rise to any right of termination, cancellation or acceleration under any
of the terms, conditions or provisions of any Lease, Contract, note, bond,
mortgage, indenture, license or other material agreement to which any Seller is
a party or by which any Seller or the Assets may be bound or (iii) violate any
material Laws applicable to any Seller or any of the Assets.




Section
5.6                      Liability
for Brokers’ Fees.




Purchaser
shall not directly or indirectly have any responsibility, liability or expense,
as a result of undertakings or agreements of Seller or its Affiliates, for
brokerage fees, finder’s fees, agent’s commissions or other similar forms of
compensation in connection with this Agreement or any agreement or transaction
contemplated hereby.


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Section
5.7                      Litigation.




With
respect to the Assets and Seller’s or any of its Affiliates’ ownership,
operation, development, maintenance, or use of any of the Assets, except as set
forth in: (i) Schedule
5.7, no proceeding, arbitration, action, suit, pending settlement, or
other legal proceeding of any kind or nature before or by any Governmental Body
(each, a “Proceeding,” and collectively “Proceedings”) (including any
take-or-pay claims) to which Seller or any of its Affiliates is a party and
which relates to the Assets is pending or, to Seller’s knowledge, threatened
against Seller or any of its Affiliates; (ii) Schedule 5.7, to Seller’s
knowledge, no Proceeding or investigation to which Seller is not a party which
relates to the Assets is pending or threatened; and (iii) Schedule 5.7, no notice in
writing from any third party (including any Governmental Body) has been received
by Seller or any of its Affiliates threatening any Proceeding relating to the
Assets which could have a Material Adverse Effect (excluding any notices
relating to any Environmental Liabilities or Environmental Law).




Section
5.8                      Taxes and
Assessments.




(a)           Seller
has paid or has caused to be paid, or will pay or will cause to be paid
(including by Purchaser), all material Taxes imposed on the Assets or in
connection with the business in which the Assets are used that have become due
and payable before the Effective Time are being properly paid, other than taxes
which are being contested in good faith as disclosed on Schedule 5.8




(b)           To
Seller’s knowledge, all of the Assets that are subject to Property Tax have been
properly listed and described on the property tax rolls of the appropriate
taxing jurisdiction for all periods prior to the Closing Date and no portion of
the Assets constitutes omitted property for Property Tax purposes.









Section
5.9                      Compliance
with Laws.




Except as
disclosed on Schedule
5.9, the Assets are, and the ownership, operation, development,
maintenance, and use of any of the Assets are, in compliance with the provisions
and requirements of all Laws of all Governmental Bodies having jurisdiction with
respect to the Assets, or the ownership, operation, development, maintenance, or
use of any of the Assets, except where the failure to so comply would not have a
Material Adverse Effect.  Notwithstanding the foregoing, Seller makes
no representation or warranty, express or implied, under this Section 5.9 relating to any
Environmental Liabilities or Environmental Law.




Section
5.10                    Contracts.




Except as
disclosed on Schedule
5.10, to the knowledge of Seller, Seller has paid its share of all costs
(including all Property Costs) payable by it under the
Contracts.  Seller is in compliance and, to Seller’s knowledge, all
counterparties are in compliance under all Contracts, except as disclosed on
Schedule 5.10 and except
for such non-compliance as would not, individually or the aggregate, have a
Material Adverse Effect. To Seller’s knowledge, Schedule 5.10 sets forth all
agreement(s) or contract for the sale, exchange, or other disposition
of


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Hydrocarbons
produced from or attributable to Seller’s interest in the Assets that is not
cancelable without penalty or other material payment without first providing
more than 60 days prior written notice.




Section
5.11                    Payments
for Hydrocarbon Production.




Except as
set forth on Schedule
5.11, (a) all rentals, royalties, excess royalty, overriding royalty
interests, Hydrocarbon production payments, and other payments due and payable
by Seller to overriding royalty holders and other interest owners under or with
respect to the Assets and the Hydrocarbons produced therefrom or attributable
thereto, have been paid, and (b) Seller is not obligated under any contract or
agreement for the sale of gas from the Assets containing a take-or-pay, advance
payment, prepayment, or similar provision, or under any gathering, transmission,
or any other contract or agreement with respect to any of the Assets to gather,
deliver, process, or transport any gas  without then or thereafter
receiving full payment therefor.




Section
5.12                    Governmental
Authorizations.




Except as
disclosed on Schedule 5.9 or
Schedule 5.12, (i) Seller has obtained and is maintaining all material
federal, state and local governmental licenses, permits, franchises, orders,
exemptions, variances, waivers, authorizations, certificates, consents, rights,
privileges and applications therefor (the “Governmental Authorizations”) that
are presently necessary or required for the ownership and operation of the
Seller Operated Assets as currently owned and operated, and (ii) no written
notices of material violation have been received by Seller, and no Proceedings
are pending or, to Seller’s knowledge, threatened in writing that might result
in any material modification, revocation, termination or suspension of any such
Governmental Authorizations or which would require any material corrective or
remediation action by Seller




Section
5.13                    Outstanding
Capital Commitments.




As of the
date hereof, there are no outstanding AFEs or other commitments to make capital
expenditures which are binding on the Assets and which Seller reasonably
anticipates will individually require expenditures by the owner of the Assets
after the Effective Time in excess of $100,000(net to Seller’s
interest)other
than those shown on Schedule
5.13.




Section
5.14                    Imbalances.




To
Seller’s knowledge, Schedule
5.14 accurately sets forth in all material respects all of Seller’s
Imbalances as of the respective dates set forth therein, arising with respect to
the Assets and, except as disclosed in Schedule 5.14, (i) no Person
is entitled to receive any material portion of Seller’s Hydrocarbons produced
from the Assets or to receive material cash or other payments to “balance” any
disproportionate allocation of Hydrocarbons produced from the Assets under any
operating agreement, gas balancing or storage agreement, gas processing or
dehydration agreement, gas transportation agreement, gas purchase agreement, or
other agreements, whether similar or dissimilar, and (ii) Seller is not
obligated to deliver any material quantities of gas or to pay any material
penalties or other material amounts, in connection with the violation of any of
the terms of any gas contract or other agreement with shippers with respect to
the Assets.


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Section
5.15                    Condemnation.




To
Seller’s knowledge, there is no actual or threatened taking (whether permanent,
temporary, whole or partial) of any part of the Properties by reason of
condemnation or the threat of condemnation.




Section
5.16                    Bankruptcy.




There are
no bankruptcy, reorganization, or receivership proceedings pending against, or,
to Seller’s knowledge, being contemplated by or threatened against
Seller.




Section
5.17                    Affiliated
Contracts.




After
Closing, the Assets will not be bound or burdened by any contractual obligation
to Seller or an Affiliate of Seller except pursuant to this
Agreement.




Section
5.18                    Foreign
Person.




No
withholding under Section 1445 of the Code is required with respect to any
Seller or its partners.




Section
5.19                    Seller Affiliate
Obligations.




Other
than as shown on Schedule
5.19, after Closing, the Assets shall not be bound by any obligation to
Seller or an Affiliate of Seller except as expressly contemplated by this
Agreement.









Section
5.20                    Abandoned
Wells.




Seller
has not abandoned, or agreed to abandon, any wells included in the Assets since
the Effective Date and, except as otherwise provided on Exhibit A-1 and except
to the extent such wells would not require material plugging and abandonment
costs, to Seller’s knowledge there are no dry holes, or otherwise inactive
wells, located on the Lands, other than wells that have been properly plugged or
abandoned.  For purposes of this Section 5.20, “material plugging and
abandonment costs” means, for any individual well, costs of $25,000 or
more.




Section
5.21                    Accuracy
of Information.




To
Seller’s knowledge, the data and information described on Schedule 5.21 is
accurate, complete and correct, except for such inaccuracies as would not have a
Material Adverse Effect.  The representations contained in this
Section 5.21 shall not be construed to be a representation with respect to the
accuracy of any estimates, forecasts or conclusions contained in any
document.


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Section
5.22                    Payout Balances.




To
Seller’s knowledge, Schedule
5.22 sets forth a complete and accurate list of the status of any
“payout” balance, as of the Effective Date, for the Wells, subject to a
reversion or other adjustment at some level of cost recovery or payout (or
passage of time or other event other than termination of a Lease by its
terms).




Section
5.23                    Operations.




To
Seller’s knowledge, except as disclosed in any Schedule hereto (including,
without limitation, Schedule
5.7, Schedule 5.9, Schedule 5.12), Seller has operated the Seller
Operated Assets in all material respects in accordance with the conditions and
provisions of any Governmental Authorizations.














ARTICLE
6


REPRESENTATIONS
AND WARRANTIES OF PURCHASER




Purchaser
represents and warrants to Seller the following:




Section
6.1                      Existence
and Qualification.




Purchaser
is duly organized, validly existing and in good standing under the laws of the
state of its formation; and Purchaser is duly qualified to do business as a
foreign limited liability companyin every jurisdiction in
which it is required to qualify in order to conduct its business, except where
the failure to so qualify would not have a material adverse effect on Purchaser;
and Purchaser is or will be as of Closing duly qualified to do business as a
foreign limited liability company in the respective jurisdictions where the
Assets are located.




Section
6.2                      Power.




Purchaser
has the power and authority to enter into and perform this Agreement and
consummate the transactions contemplated by this Agreement.




Section
6.3                      Authorization
and Enforceability.




The
execution, delivery and performance of this Agreement, and the performance of
the transaction contemplated hereby, have been duly and validly authorized by
all necessary limited liability company action on the part of Purchaser. This
Agreement has been duly executed and delivered by Purchaser (and all documents
required hereunder to be executed and delivered by Purchaser at Closing will be
duly executed and delivered by Purchaser) and this Agreement constitutes, and at
the Closing such documents will constitute, the valid and binding obligations of
Purchaser, enforceable against Purchaser in accordance with their terms except
as such enforceability may be limited by applicable bankruptcy or other similar
laws affecting the rights


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and
remedies of creditors generally as well as to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).




Section
6.4                      No
Conflicts.




The
execution, delivery and performance by Purchaser of this Agreement and the
consummation of the transactions contemplated herein will not conflict with or
result in a breach of any provisions of the organizational or other governing
documents of Purchaser nor will it violate any Laws applicable to Purchaser or
any of its property.




Section
6.5                      Liability
for Brokers’ Fees.




Seller
shall not directly or indirectly have any responsibility, liability or expense,
as a result of undertakings or agreements of Purchaser or its Affiliates, for
brokerage fees, finder’s fees, agent’s commissions or other similar forms of
compensation in connection with this Agreement or any agreement or transaction
contemplated hereby.




Section
6.6                      Litigation.




There are
no Proceedings pending, or to the actual knowledge of Purchaser, threatened in
writing before any Governmental Body against Purchaser or any Affiliate of
Purchaser which are reasonably likely to impair materially Purchaser’s ability
to perform its obligations under this Agreement.




Section
6.7                      Financing.




Prior to
the Closing Date, Purchaser will have sufficient cash (in United States dollars)
to enable it to pay the Closing Payment to Seller at the Closing and to
otherwise satisfy its obligations under this Agreement.




Section
6.8                      Limitation.




Except
for the representations and warranties expressly made by Seller in Article 5of this
Agreement, in the Conveyances or confirmed in any certificate furnished or to be
furnished to Purchaser pursuant to this Agreement, Purchaser represents and
acknowledges that (i) there are no representations or warranties, express,
statutory or implied, as to the Assets or prospects thereof, and (ii) Purchaser
has not relied upon any oral or written information provided by
Seller.  Without limiting the generality of the foregoing, subject to
Section 5.7, Purchaser
represents and acknowledges that Seller has made and will make no representation
or warranty regarding any matter or circumstance relating to Environmental Laws,
Environmental Liabilities, the release of materials into the environment or
protection of human health, safety, natural resources or the environment or any
other environmental condition of the Assets.




Section
6.9                      SEC
Disclosure.




Purchaser
is acquiring the Assets for its own account for use in its trade or business,
and not with a view toward or for sale associated with any distribution thereof,
nor with any present


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intention
of making a distribution thereof within the meaning of the Securities Act of
1933, as amended, and applicable state securities laws.




Section
6.10                    Bankruptcy.




There are
no bankruptcy, reorganization or receivership proceedings pending against, being
contemplated by, or, to Purchaser’s knowledge, threatened against
Purchaser.




Section
6.11                    Qualification.




Purchaser
is now, and hereafter shall continue to be, qualified to own and assume
operatorship of federal and state oil, gas and mineral leases in all
jurisdictions where the Assets to be transferred to it are located, and the
consummation of the transactions contemplated in this Agreement will not cause
Purchaser to be disqualified as such an owner or operator.  To the
extent required by the applicable Law, as of the Closing, Purchaser currently
has, and will continue to maintain, lease bonds, area-wide bonds or any other
surety bonds as may be required by, and in accordance with, such state or
federal regulations governing the ownership and operation of such
leases.




Section
6.12                    Knowledge
of Title Defects and Environmental Defects.




Seller
does not have any actual knowledge of any Title Defects or Environmental Defects
associated with the Assets as of the date of this Agreement.




Section
6.13                    Independent
Evaluation.




Purchaser
is sophisticated in the evaluation, purchase, ownership and operation of oil and
gas properties and related facilities.  In making its decision to
enter into this Agreement and to consummate the transactions contemplated
herein, Purchaser (a) has relied or shall rely solely on its own independent
investigation and evaluation of the Assets and the advice of its own legal, tax,
economic, insurance, environmental, engineering, geological and geophysical
advisors and the express provisions of this Agreement and not on any comments,
statements, projections or other materials made or given by any representatives
or consultants or advisors engaged by Seller, and (b) has satisfied or shall
satisfy itself through its own due diligence as to the environmental and
physical condition and state of repair of and contractual arrangements and other
matters affecting the Assets.  Purchaser has no knowledge of any fact
that results in the breach of any representation, warranty or covenant of Seller
given hereunder.




ARTICLE
7


COVENANTS
OF THE PARTIES




Section
7.1                      HSR
Act.




If
applicable, within five business days following the execution by Purchaser and
Seller of this Agreement, Purchaser and Seller will each prepare and
simultaneously file with the DOJ and the FTC, as applicable, the notification
and report form required for the transactions contemplated by this Agreement by
the HSR Act, and request early termination of the waiting period
thereunder.  Purchaser and Seller agree to respond promptly to any
inquiries from the


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DOJ or
the FTC concerning such filings and to comply in all material respects with the
filing requirements of the HSR Act.  Purchaser and Seller shall
cooperate with each other and, subject to the terms of the Confidentiality
Agreement, shall promptly furnish all information to the other party that is
necessary in connection with Purchaser’s and Seller’s compliance with the HSR
Act.  Purchaser and Seller shall keep each other fully advised with
respect to any requests from or communications with the DOJ or FTC concerning
such filings and shall consult with each other with respect to all responses
thereto.  Each of Seller and Purchaser shall use its reasonable
efforts to take all actions reasonably necessary and appropriate in connection
with any HSR Act filing to consummate the transactions contemplated
hereby.




Section
7.2                      Government
Reviews.




(a)           Seller
and Purchaser shall in a timely manner (a) make all required filings, if any,
with and prepare applications to and conduct negotiations with, each
Governmental Body as to which such filings, applications or negotiations are
necessary or appropriate in the consummation of the transactions contemplated
hereby and (b) provide such information as each may reasonably request to make
such filings, prepare such applications and conduct such
negotiations.  Each party shall cooperate with and use all
commercially reasonable efforts to assist the other with respect to such
filings, applications and negotiations.




Section
7.3                      Notification
of Breaches.




Until the
Closing,




(a)           Purchaser
shall notify Seller promptly after Purchaser obtains actual knowledge that any
representation or warranty of Seller contained in this Agreement is untrue in
any material respect or will be untrue in any material respect as of the Closing
Date, or that any covenant or agreement to be performed or observed by Seller
prior to or on the Closing Date has not been so performed or observed in any
material respect.




(b)           Seller
shall notify Purchaser promptly after Seller obtains actual knowledge that any
representation or warranty of Purchaser contained in this Agreement is untrue in
any material respect or will be untrue in any material respect as of the Closing
Date, or that any covenant or agreement to be performed or observed by Purchaser
prior to or on the Closing Date has not been so performed or observed in any
material respect.




(c)           If
any of Purchaser’s or Seller’s representations or warranties is untrue or shall
become untrue in any material respect between the date of execution of this
Agreement and the Closing Date, or if any of Purchaser’s or Seller’s covenants
or agreements to be performed or observed prior to or on the Closing Date shall
not have been so performed or observed in any material respect, but if such
breach of representation, warranty, covenant or agreement shall (if curable) be
cured by the Closing, then such breach shall be considered not to have occurred
for all purposes of this Agreement.  No such notification shall affect
the representations or warranties of the parties or the conditions to their
respective obligations hereunder.




(d)           There
shall be no breach of the covenants in this Section as a result of a party’s
failure to report a breach of any representation or warranty or a failure to
perform or observe any  45870756.5
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covenant
or agreement of which it had knowledge if the party subject to the breach or
failure also had knowledge thereof prior to Closing.




Section
7.4                      Letters-in-Lieu;
Assignments; Operatorship.




(a)           Seller
will execute on the Closing Date letters in lieu of division and transfer orders
relating to the Assets, on forms prepared by Seller and reasonably satisfactory
to Purchaser, to reflect the transaction contemplated hereby.




(b)           Seller
will prepare and execute, and Purchaser will execute, on the Closing Date, all
assignments necessary to convey to Purchaser all federal and state Leases in the
form as prescribed by the applicable Governmental Body and otherwise acceptable
to Purchaser and Seller.




(c)           Seller
makes no representations or warranties to Purchaser as to transferability or
assignability of operatorship of any Seller Operated Assets.  Rights
and obligations associated with operatorship of such Properties are governed by
operating and similar agreements covering the Properties and will be determined
in accordance with the terms of such agreements. However, Seller will assist
Purchaser in Purchaser’s efforts to succeed Seller, through Purchaser’s agent,
Linn Operating, Inc., as operator of any Wells and Units included in the
Assets.  Purchaser shall, promptly following Closing, file all
appropriate forms and declarations or bonds with federal and state agencies
relative to its assumption of operatorship.  For all Seller Operated
Assets, Seller shall execute and deliver to Purchaser, and Purchaser shall
promptly file the appropriate forms with the applicable regulatory agency
transferring operatorship of such Assets to Purchaser.




Section
7.5                      Public
Announcements.




Until the
Closing, neither Seller nor Purchaser shall make any press release or other
public announcement regarding the existence of this Agreement, the contents
hereof or the transactions contemplated hereby without the prior written consent
of the others; provided, however, the foregoing shall not restrict disclosures
by Purchaser or Seller which are required by applicable securities or other laws
or regulations or the applicable rules of any stock exchange having jurisdiction
over the disclosing party or its Affiliates.  At or after Closing, the
content of any press release or public announcement first announcing the
consummation of this transaction shall be subject to the prior review and
reasonable approval of Seller and Purchaser; provided, however, the foregoing
shall not restrict disclosures by Purchaser or Seller which are required by
applicable securities or other laws or regulations or the applicable rules of
any stock exchange having jurisdiction over the disclosing party or its
Affiliates.




Section
7.6                      Operation
of Business.




Except as
set forth on Schedule
7.6, until the Closing, Seller (i) will operate the Assets and the
business thereof in the ordinary course, (ii) will not, without the prior
written consent of Purchaser, which consent shall not be unreasonably withheld,
commit to any operation, or series of related operations thereon, reasonably
anticipated to require future capital expenditures by Purchaser as owner of the
Assets in excess of $100,000 (net to Seller’s interest), or make any capital
expenditures in respect of the Assets in excess of $100,000 (net to Seller’s
interest), or


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terminate,
materially amend, execute or extend any material Contracts affecting the Assets,
(iii) will use commercially reasonable efforts to maintain insurance coverage on
the Assets presently furnished by nonaffiliated third parties in the amounts and
of the types presently in force, (iv) will use commercially reasonable efforts
to maintain in full force and effect all Leases, (v) will maintain all material
governmental permits and approvals affecting the Assets, (vi) will not transfer,
farmout, sell, encumber or otherwise dispose of any Assets, except for (A) sales
and dispositions of Hydrocarbon production in the ordinary course of business
consistent with past practices or (B) transfers, farmouts, encumbrances or other
dispositions of Assets, in one or more transactions, not exceeding $100,000 (net
to Seller’s interest) of consideration (in any form), in the aggregate, and
(vii) will not commit to do any of the foregoing. Purchaser’s approval of any
action restricted by this Section 7.6 shall be
considered granted within ten (10) days (unless a shorter time is reasonably
required by the circumstances and such shorter time is specified in Seller’s
written notice) of Seller’s written notice to Purchaser requesting such consent
unless Purchaser notifies Seller to the contrary in writing during that period.
In the event of an emergency, Seller may take such action as a prudent operator
would take and shall notify Purchaser of such action promptly
thereafter.  Until and through the Closing Date, Seller agrees to use
commercially reasonable efforts to timely notify Purchaser of any forced pooling
applications received by Seller with respect to the Assets in order to allow
Purchaser to timely respond thereto; provided, however, that any failure by
Seller to comply with this sentence shall not constitute a breach of this
Agreement or otherwise subject Seller to any liability to
Purchaser.




Purchaser
acknowledges that Seller may own an undivided interest in certain of the Assets,
and Purchaser agrees that the acts or omissions of the other working interest
owners who are not affiliated with Seller shall not constitute a violation of
the provisions of this Section
7.6nor shall any action required by a vote of working interest owners
constitute such a violation so long as Seller has voted its interest in a manner
consistent with the provisions of this Section 7.6.




Section
7.7                      Preference
Rights and Transfer Requirements.




(a)           The
transactions contemplated by this Agreement are expressly subject to all validly
existing and applicable Preference Rights and Transfer
Requirements.  Prior to the Closing Date, Seller shall initiate all
procedures which are reasonably required to comply with or obtain the waiver of
all Preference Rights and Transfer Requirements set forth in Schedule 7.7 with respect
to the transactions contemplated by this Agreement.  Seller shall use
its commercially reasonable efforts to obtain all applicable consents and to
obtain waivers of applicable Preference Rights; provided, however, Seller shall
not be obligated to pay any consideration to (or incur any cost or expense for
the benefit of) the holder of any Preference Right or Transfer Requirement in
order to obtain the waiver thereof or compliance therewith.




(b)           If
the holder of a Preference Right elects prior to Closing to purchase the Asset
subject to a Preference Right (a “Preference Property”) in accordance with the
terms of such Preference Right, and Seller receives written notice of such
election prior to the Closing, such Preference Property will be eliminated from
the Assets and the Purchase Price shall be reduced by the Allocated Value of the
Preference Property.




(c)           If


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(i)
            a
      third party brings any suit, action or other proceeding prior to the
      Closing seeking to restrain, enjoin or otherwise prohibit the consummation
      of the transactions contemplated hereby in connection with a claim to
      enforce a Preference Right;




(ii)
            an
      Asset is subject to a Transfer Requirement that provides that transfer of
      such Asset without compliance with such Transfer Requirement will result
      in termination or other material impairment of any rights in relation to
      such Asset, and such Transfer Requirement is not waived, complied with or
      otherwise satisfied prior to the Closing Date;
  or




(iii)
            the
      holder of a Preference Right does not elect to purchase such Preference
      Property or waive such Preference Right with respect to the transactions
      contemplated by this Agreement prior to the Closing Date and the time in
      which the Preference Right may be exercised has not
    expired,




then,
unless otherwise agreed by Seller and Purchaser, the Asset or portion thereof
affected by such Preference Right or Transfer Requirement (a “Retained Asset”)
shall be held back from the Assets to be transferred and conveyed to Purchaser
at Closing and the Purchase Price to be paid at Closing shall be reduced by the
Allocated Value of such Retained Asset pursuant to Section 7.7(b). Any Retained
Asset so held back at the initial Closing will be conveyed to Purchaser at a
delayed Closing (which shall become the new Closing Date with respect to such
Retained Asset) within ten (10) days following the date on which the suit,
action or other proceeding, if any, referenced in clause (i) above is settled or
a judgment is rendered (and no longer subject to appeal) permitting transfer of
the Retained Asset to Purchaser pursuant to this Agreement and Seller obtains,
complies with, obtains a waiver of or notice of election not to exercise or
otherwise satisfies all remaining Preference Rights and Transfer Requirements
with respect to such Retained Asset as contemplated by this Section (or if
multiple Assets are Retained Assets, on a date mutually agreed to by the parties
in order to consolidate, to the extent reasonably possible, the number of
Closings).  At the delayed Closing, Purchaser shall pay Seller a
purchase price equal to the amount by which the Purchase Price was reduced on
account of the holding back of such Retained Asset (as adjusted pursuant to
Section 2.2 through the
new Closing Date therefor); provided, however, if all such Preference Rights and
Transfer Requirements with respect to any Retained Asset so held back at the
initial Closing are not obtained, complied with, waived or otherwise satisfied
as contemplated by this Section within one hundred eighty (180) days after the
initial Closing has occurred with respect to any Asset, then at the sole
election of Seller such Retained Asset shall be eliminated from the Assets and
shall become an Excluded Asset and this Agreement, unless Seller decides to
proceed with a closing on such Retained Asset, in which case Purchaser shall be
deemed to have waived any objection (and shall be obligated to indemnify the
Seller Indemnified Persons for all Losses) with respect to non-compliance with
such Preference Rights and Transfer Requirements with respect to such Retained
Asset(s).




(d)           Purchaser
acknowledges that Seller desires to sell all of the Assets to Purchaser and
would not have entered into this Agreement but for Purchaser’s agreement to
purchase all of the Assets as herein provided.  Accordingly, it is
expressly understood and agreed that Seller does not desire to sell any Property
affected by a Preference Right to Purchaser unless the sale of


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all of
the Assets is consummated by the Closing Date in accordance with the terms of
this Agreement.  In furtherance of the foregoing, Seller’s obligation
hereunder to sell the Preference Properties to Purchaser is expressly
conditioned upon the consummation by the Closing Date of the sale of all of the
Assets (other than Retained Assets or other Assets excluded pursuant to the
express provisions of this Agreement) in accordance with the terms of this
Agreement, either by conveyance to Purchaser or conveyance pursuant to an
applicable Preference Right; provided that, nothing herein is intended or shall
operate to extend or apply any Preference Right to any portion of the Assets
which is not otherwise burdened thereby.  Time is of the essence with
respect to the parties’ agreement to consummate the sale of the Assets by the
Closing Date (or by the delayed Closing Date pursuant to Section 7.7(c)).




Section
7.8                      Tax
Matters.





(a)          Each
party shall provide the other party with reasonable information which may be
required by the other party for the purpose of preparing Tax Returns and
responding to any audit by any Taxing Authority.  Each party shall
cooperate with all reasonable requests of the other party made in connection
with contesting the imposition of Taxes.  Notwithstanding anything to
the contrary in this Agreement neither party shall be required at any time to
disclose to the other party any Tax Returns or other confidential Tax
information




(b)           Seller
shall prepare or cause to be prepared all Tax Returns with respect to the Assets
required to be filed prior to or on the Closing Date.  The Seller will
cause such Tax Returns to be timely filed and will provide a copy to the
Purchaser.




(c)           Purchaser
shall prepare or cause to be prepared all Tax Returns with respect to the Assets
required to be filed after the Closing Date for all Pre-Closing Periods and all
Straddle Periods.  The Purchaser will cause such Tax Return to be
timely filed and will provide a copy to the Seller.  Subject to Section 11.12(c), not later
than five (5) days prior to the due date for payment of Taxes with respect to
any Tax Return for a Pre-Closing Period or Straddle Period, the Seller shall pay
to the Purchaser the amount of any Taxes with respect to such Tax Return for
which Seller is responsible pursuant to Section 1.4(c).




(d)           Notwithstanding anything to the
contrary in thisSection
7.8,Purchaser shall be responsible for the
Taxes set forth inSection
12.3.




Section
7.9                      Further
Assurances.




After
Closing, Seller and Purchaser each agrees to take such further actions and to
execute, acknowledge and deliver all such further documents as are reasonably
requested by the other party for carrying out the purposes of this Agreement or
of any document delivered pursuant to this Agreement.




Section
7.10                    Insurance.




At all
times material to this Agreement, Purchaser will maintain the types and amount
of insurance that is reasonable and customary in the industry.  The
parties agree that the types and amount provided by Purchaser to Seller via
email on the date of this Agreement is reasonable and customary as of the date
of this Agreement.


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Section
7.11                    No
Solicitation of Transactions.




So long
as Purchaser is not in default of this Agreement, Seller shall not, directly or
indirectly, through any officer, director, stockholder, employee, agent,
financial advisor, banker or other representative or Affiliate, or otherwise,
solicit, initiate, or encourage the submission of any proposal or offer from any
Person relating to any acquisition or purchase of all or any material portion of
the Assets or participate in any negotiations regarding, or furnish to any other
Person any information with respect to, or otherwise cooperate in any way with,
or assist or participate in, facilitate, or encourage, any effort or attempt by
any other Person to do or seek any of the foregoing.  Seller shall
communicate as soon as reasonably practicable to Purchaser the material terms of
any such proposal (and the identity of the party making such proposal) which it
may receive and, if such proposal is in writing, Seller shall promptly deliver a
copy of such proposal to Purchaser.  Seller agrees not to release any
third party from, or waive any provision of, any confidentiality agreement
relating to the Assets to which Seller or any of its Affiliates is a
party.  Seller immediately shall cease and cause to be terminated all
existing discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing.




Section
7.13                    Record
Retention.




Purchaser,
for a period of seven years following Closing, will (i) retain the Records, (ii)
provide Seller, its Affiliates and its and their officers, employees and
representatives with access to the Records (to the extent that Seller has not
retained the original or a copy) during normal business hours for review and
copying at Seller’s expense and upon reasonable notice, and (iii) provide
Seller, its Affiliates and its and their officers, employees and representatives
with access, during normal business hours, to materials received or produced
after Closing relating to any indemnity claims made under Sections 11.3 and 11.4 of this
Agreement for review and copying at Seller’s expense.  If Purchaser
shall desire to dispose of or transfer any such Records or other materials upon
or after the expiration of such seven-year period, Purchaser shall, prior to any
disposition, give Seller notice and a reasonable opportunity at Seller’s expense
to segregate and remove or copy such Records or other materials as Seller may
select.




Section
7.14                    Bonds, Letters of
Creditand
Guarantees .




Purchaser
acknowledges that none of the bonds, letters of credit and guarantees, if any,
posted by Seller or its Affiliates with Governmental Authorities or Third
Parties and relating to the Assets are transferable to
Purchaser.  Except to the extent that Purchaser will, as of Closing,
be covered by the bonds of the operators of the applicable Assets, then on or
before the Closing Date, Purchaser shall obtain, or cause to be obtained in the
name of Purchaser, replacements for such bonds, letters of credit and
guarantees, to the extent such replacements are necessary to permit the
cancellation as of Closing of the bonds, letters of credit and guarantees posted
by Seller and/or its Affiliates.  A schedule of the bonds Seller has
been required to maintain with respect to the Assets is attached hereto as Schedule 7.14.




Section
7.15                    Cure of
Misrepresentations.




If any of
the representations and warranties contained in Article 5 or 6 hereof are
determined (whether by notice from a party or otherwise) to have been untrue or
incorrect as of


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the date
of this Agreement, then any cure by the other party of same shall be at such
other party’s own expense.




Section
7.16                   Cooperation
with Respect to Seller Retained Litigation, Etc.




Purchaser
agrees to use reasonable efforts to cooperate with Seller in connection with
Seller’s defense and other actions relating to or arising out of the litigation
and claims set forth on Schedule 5.7 and with respect
to future audits.  Purchaser agrees to make available Purchaser’s
employees engaged in, or having information about, the ownership and operation
of the Assets, for the purposes of providing testimony, depositions, information
and other related activities relating to such litigation, claims and
audits.




Section
7.17                    Plugging,
Abandonment, Decommissioning and Other Costs..




In
addition to its other obligations under this Agreement, Purchaser shall comply
with all Laws, Leases, Contracts (including all joint and unit operating
agreements) and prevailing industry standards relating to (i) the plugging,
abandonment and/or replugging of all Wells, including inactive Wells or
temporarily abandoned Wells, included in the Assets, (ii) the dismantling or
decommissioning and removal of any Equipment and other property of whatever kind
related to or associated with operations and activities conducted by whomever on
the Properties or otherwise, pursuant to the Leases or Applicable Contracts and
(iii) the clean up, restoration and/or remediation of the property covered by
the Leases or related to the Assets (collectively, the “P&A
Obligations”).




Section
7.18                    Employee
Matters.




(a)                   Effective
as of the Closing Date, Purchaser may make an offer of employment to Business
Employees. Nothing in this Agreement shall require or be construed or
interpreted as requiring the Purchaser to offer employment to any Business
Employee or to continue the employment of any employee of Seller (including any
Transferred Employees) following their respective Hire Date, or to prevent
Purchaser from changing the terms and conditions of employment (including
compensation and benefits) of any of its employees (including any Transferred
Employees) following their respective Hire Dates.  Seller and the
Purchaser hereby acknowledge and agree that any employment offered by Purchaser
to a Transferred Employee will be "at will" and may be terminated by the
Purchaser or such Transferred Employee at any time for any reason (subject to
applicable Laws and to any specific written commitments made to the contrary by
Purchaser or by such Transferred Employee).  Further, any such offer
of employment shall be on such terms and conditions as Purchaser determines and
may be conditioned upon the Transferred Employee’s passage of Purchaser’s
pre-employment screening requirements.




(b)                   For
purposes of this Agreement, a “Transferred Employee” is a Business Employee who
accepts an offer of employment made pursuant to Section 7.18(a).  No
Seller Employee will become a Transferred Employee unless he or she (i) accepts
Purchaser’s offer of employment under the terms provided in Purchaser’s offer,
(ii) passes any required pre-employment screening required by Purchaser, (iii)
on the date hired by Purchaser, is actively at work, on sickness or disability
leave, or an approved leave of absence; and (iv) completes one


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hour of
actual service with Purchaser.  On or before each Transferred
Employee’s date of hire by Purchaser, if any, Seller shall take any necessary
action to waive any covenants not to compete, confidentiality provisions or
similar restrictions under agreements between Seller and the Transferred
Employee that may be applicable to any Transferred Employee, but only to the
extent any of the foregoing would preclude a Transferred Employee from accepting
employment with Purchaser, and may not restrain such Transferred Employee in any
way in performing his services for the Purchaser




(c)           Purchaser
shall take such actions as are necessary to provide each Transferred Employee
with credit for up to five (5) years of service for Seller and its ERISA
Affiliates (including, without limitation, Merit Energy Company LLC) for all
purposes, including eligibility, vesting, entitlement to benefits, and benefit
accruals, under all employee benefit plans (as defined in section 3(3) of ERISA)
and all vacation, sick leave, service award, severance, pension, medical and
dental (including retiree medical and dental), and compensation plans, policies,
agreements and arrangements maintained by the Purchaser or any of its Affiliates
in which such Transferred Employee participates on or after the Closing Date in
the same manner as if such service had been service for Purchaser completed
after the Closing.




(d)           Purchaser
shall take such actions as are necessary to offer Transferred Employees medical
and dental coverage for Transferred Employees and their spouses and dependents
under Purchaser’s Group Health Plan.  Purchaser shall use best efforts
to cause each such Group Health Plan, and applicable insurance carriers, third
party administrators and any other third parties, to (i) waive any waiting
period(s) under the Group Health Plan otherwise applicable to such Transferred
Employees, (ii) waive all limitations as to pre-existing medical conditions
under the Group Health Plan applicable to Transferred Employees to the extent
that such medical conditions would be covered under the Group Health Plan if
they were not pre-existing conditions, and (iii) provide Transferred
Employees with credit, for the year in which the Closing Date occurs, for any
co-payments, deductibles and out-of-pocket expenses paid prior to the Closing
Date in satisfying any applicable co-payment, deductible and out-of-pocket
expense requirements under the Group Health Plan.  Purchaser shall
take such actions as are necessary to provide continuation health care coverage
to Transferred Employees and their qualified beneficiaries who incur qualifying
events on or after the Closing Date in accordance with the continuation health
care coverage requirements of COBRA.




(e)           Purchaser
shall take such actions as are necessary to cause Transferred Employees to
participate in any incentive bonus programs in which similarly situated
employees of Purchaser or its Affiliates participate.




(f)           With
respect to events following the Closing, Seller shall be responsible for sending
timely and appropriate notices to all Transferred Employees required under the
Worker Adjustment and Retraining Notification Act (“WARN”) and all other
applicable Laws relating to plant or facility closings or otherwise regulating
the termination of employees.  To the extent that any liability is
incurred under any such Laws based on Purchaser’s actions after the Closing,
Purchaser shall be solely and exclusively responsible for all obligations and
liabilities incurred under WARN and other such Laws relating to this
transaction.


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(g)           Seller
shall make available to Purchaser records which provide information regarding
Transferred Employees’ names and dates of hire by Seller or its ERISA
Affiliates.  Seller shall not provide Purchaser records pertaining to
performance ratings and evaluations, disciplinary records and medical
records.




(h)           Following
the Closing Purchaser shall cause to be accepted by the trustee of a Purchaser
Retirement Plan in which a Transferred Employee is eligible to participate in a
rollover of any eligible rollover distribution (within the meaning of section
402(c) of the Code) of such Transferred Employee’s benefit under a Seller
Retirement Plan provided that Purchaser obtains such information as is
satisfactory to Purchaser to assure itself that such Seller Retirement Plan
satisfies the qualification requirements of section 401(a) of the
Code.




ARTICLE
8


CONDITIONS
TO CLOSING




Section
8.1                      Conditions
of Seller to Closing.




The
obligations of Seller to consummate the transactions contemplated by this
Agreement are subject, at the option of Seller, to the satisfaction or waiver by
Seller on or prior to Closing of each of the following conditions:




(a)           Each
of the representations and warranties of Purchaser contained in this Agreement
shall be true and correct in all material respects (other than those
representations and warranties of Purchaser that are qualified by materiality,
which shall be true and correct in all respects) as of the Closing Date as
though made on and as of the Closing Date, except to the extent that any such
representation or warranty is made as of a specified date, in which case such
representation or warranty shall have been true and correct in all material
respects (other than those representations and warranties of Purchaser that are
qualified by materiality, which shall be true and correct in all respects) as of
such specified date;




(b)           Purchaser
shall have performed and observed, in all material respects, all covenants and
agreements to be performed or observed by it under this Agreement prior to or on
the Closing Date;




(c)           No
Proceeding by a third party (including any Governmental Body) seeking to
restrain, enjoin or otherwise prohibit the consummation of the transactions
contemplated by this Agreement shall be pending before any Governmental Body and
no order, writ, injunction or decree shall have been entered and be in effect by
any court or any Governmental Body of competent jurisdiction, and no statute,
rule, regulation or other requirement shall have been promulgated or enacted and
be in effect, that on a temporary or permanent basis restrains, enjoins or
invalidates the transactions contemplated hereby; provided, however, the
Closing shall proceed notwithstanding any Proceedings seeking to restrain,
enjoin or otherwise prohibit consummation of the transactions contemplated
hereby brought by holders of Preference Rights seeking to enforce such rights
with respect to the Assets with aggregate Allocated Values of less than twenty
percent (20%) of the total unadjusted Purchase Price, and the Assets subject to
such Proceedings shall be treated in accordance with Section 7.7;


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(d)           Purchaser
shall have delivered (or be ready, willing and able to immediately deliver) to
Seller duly executed counterparts of the Conveyances and all other documents and
certificates to be delivered by Purchaser under Section 9.3 and shall
have performed (or be ready, willing and able to immediately perform) the other
obligations required to be performed by it under Section 9.3 (including,
without limitation, delivery of the Closing Payment); and




(e)           The
sum of all uncured Title Defect Amounts for Material Title Defects determined
under Section 3.4(g)
prior to Closing, less the sum of all Title Benefit Amounts for Material Title
Benefits determined under Section 3.4(h) prior to the
Closing, plus Environmental Defects Amounts attributable to Material
Environmental Defects, determined or asserted in accordance with this Agreement,
shall be less than twenty percent (20%) of the total unadjusted Purchase
Price.




(f)           The
sum of all Losses from casualties to and takings of the Assets, determined or
asserted in accordance with this Agreement, shall be less than twenty percent
(20%) of the unadjusted Purchase Price;




(g)           If
applicable, the waiting period under the HSR Act applicable to the consummation
of the transactions contemplated hereby shall have expired, notice of early
termination shall have been received or a consent order issued by or from
applicable Governmental Authorities.




(h)           Purchaser
shall have obtained, or caused to be obtained, in the name of Purchaser, (i) the
Bond, and (ii) replacements for Seller’s and/or its Affiliates’ bonds, letters
of credit and guaranties, if any, to the extent required by Section 7.15.




(i)           Purchaser
shall have furnished Seller with certificates of insurance on forms reasonably
acceptable to Seller which list Purchaser’s insurance policies relating to the
Assets, including (i) insurance which complies with all applicable workers’
compensation and occupational disease laws covering all of Purchaser’s employees
performing any work or activities as to oil and gas leasehold interests subject
to this Agreement, (ii) commercial general liability insurance (including
contractual liability coverage) and pollution liability insurance, (iii) excess
liability insurance (including contractual liability coverage) of at least
$50,000,000, (iv) well control insurance of at least $10,000,000, and (v) such
other insurance and proof of financial responsibility as is required under the
applicable Laws.




Section
8.2                      Conditions
of Purchaser to Closing.




The
obligations of Purchaser to consummate the transactions contemplated by this
Agreement are subject, at the option of Purchaser, to the satisfaction or waiver
by Purchaser on or prior to Closing of each of the following
conditions:




(a)           Each
of the representations and warranties of Seller contained in this Agreement
shall be true and correct in all material respects (other than those
representations and warranties of Seller that are qualified by materiality or
Material Adverse Effect, which shall be true and correct in all respects) as of
the Closing Date as though made on and as of the Closing Date, except to the
extent that any such representation or warranty is made as of a specified date,
in which case such representation or warranty shall have been true and correct
in all material


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respects
(other than those representations and warranties of Seller that are qualified by
materiality or Material Adverse Effect, which shall be true and correct in all
respects) as of such specified date;




(b)           Seller
shall have performed and observed, in all material respects, all covenants and
agreements to be performed or observed by it under this Agreement prior to or on
the Closing Date;




(c)           No
Proceeding by a third party (including any Governmental Body) seeking to
restrain, enjoin or otherwise prohibit the consummation of the transactions
contemplated by this Agreement shall be pending before any Governmental Body and
no order, writ, injunction or decree shall have been entered and be in effect by
any court or any Governmental Body of competent jurisdiction, and no statute,
rule, regulation or other requirement shall have been promulgated or enacted and
be in effect, that on a temporary or permanent basis restrains, enjoins or
invalidates the transactions contemplated hereby; provided, however, the
Closing shall proceed notwithstanding any Proceedings seeking to restrain,
enjoin or otherwise prohibit consummation of the transactions contemplated
hereby brought by holders of Preference Rights seeking to enforce such rights
with respect to the Assets with aggregate Allocated Values of less than twenty
percent (20%) of the total unadjusted Purchase Price, and the Assets subject to
such Proceedings shall be treated in accordance withSection 7.7;




(d)           Seller
shall have delivered (or be ready, willing and able to immediately deliver) to
Purchaser duly executed counterparts of the Conveyances and all other documents
and certificates to be delivered by Seller under Section 9.2 and shall
have performed (or be ready, willing and able to immediately perform) the other
obligations required to be performed by it under Section 9.2;




(e)           The
sum of all uncured Title Defect Amounts for Material Title Defects determined
under Section 3.4(g)
prior to the Closing, less the sum of all Title Benefit Amounts for Material
Title Benefits determined under Section 3.4(h) prior to the
Closing, plus Environmental Defects Amounts attributable to Material
Environmental Defects, shall be less than twenty percent (20%) of the unadjusted
Purchase Price;




(f)           The
sum of all Losses from casualties to and takings of the Assets, determined or
asserted in accordance with this Agreement, shall be less than twenty percent
(20%) of the unadjusted Purchase Price; and




(g)           If
applicable, the waiting period under the HSR Act applicable to the consummation
of the transactions contemplated hereby shall have expired, notice of early
termination shall have been received or a consent order issued by or from
applicable Governmental Authorities.




ARTICLE
9


CLOSING




Section
9.1                      Time and
Place of Closing.


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(a)           Unless
this Agreement shall have been terminated and the transactions herein
contemplated shall have been abandoned pursuant to Article 10, and subject to the
satisfaction or waiver of the conditions set forth in Article 8 (other than
conditions the fulfillment of which by their nature is to occur at the
completion of the transactions contemplated by this Agreement (the “Closing”)),
the Closing shall take place at 10:00 a.m., local time, on January 29, 2009, at
Seller’s offices  in Dallas, Texas, unless another date, time or place
is mutually agreed to in writing by Purchaser and Seller.  If any of
the conditions (other than conditions the fulfillment of which by their nature
is to occur at the Closing) set forth in Article 8 are not satisfied or
waived at the time the Closing is to occur pursuant to the foregoing sentence of
this Section 9.1(a),
then subject to Article 10the Closing shall occur on a date thereafter that is the third Business
Day after the satisfaction or waiver of all such conditions.




(b)           The
date on which the Closing occurs is herein referred to as the “Closing
Date.”




Section
9.2                      Obligations
of Seller at Closing.




At the
Closing, upon the terms and subject to the conditions of this Agreement, Seller
shall deliver or cause to be delivered to Purchaser, or perform or cause to be
performed, the following:




(a)           the
Conveyances in sufficient duplicate originals to allow recording in all
appropriate jurisdictions and offices, duly executed by Seller;




(b)           letters-in-lieu
of transfer orders covering the Assets, duly executed by Seller;




(c)           a
certificate duly executed by an authorized corporate officer of Seller, dated as
of Closing, certifying on behalf of Seller that the conditions set forth in
Section 8.2(a)and Section 8.2(b)have been
fulfilled;




(d)           the
Preliminary Closing Statement;




(e)           an
executed statement described in Treasury Regulation 1.1445-2(b)(2) certifying
that neither Seller nor any partner of Seller is a foreign person within the
meaning of the Code.




(f)           any
other agreements, instruments and documents which are required by other terms of
this Agreement to be executed and/or delivered at Closing.




Section
9.3                      Obligations
of Purchaser at Closing.




At the
Closing, upon the terms and subject to the conditions of this Agreement,
Purchaser shall deliver or cause to be delivered to Seller, or perform or caused
to be performed, the following:




(a)           a
wire transfer of the Closing Payment, in same-day funds;




(b)           the
Conveyances, duly executed by Purchaser;




(c)           letters-in-lieu
of transfer orders covering the Assets, duly executed by Purchaser;


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(d)           a
certificate by an authorized corporate officer of Purchaser, dated as of
Closing, certifying on behalf of Purchaser that the conditions set forth in
Sections 8.1(a) and
8.1(b) have been
fulfilled;




(e)           
the Preliminary Closing Statement; and




(f)           Any
other agreements, instruments and documents which are required by other terms of
this Agreement to be executed and/or delivered at Closing.




Section
9.4                      Closing Adjustments and
Closing Payment.




(a)           Not
later than five (5) Business Days prior to the Closing Date, Seller shall
prepare and deliver to Purchaser, based upon the best information available to
Seller, a preliminary settlement statement estimating the Adjusted Purchase
Price after giving effect to all adjustments listed in Section 2.2 and 2.3(the
“Preliminary Closing Statement”).  The estimate delivered in
accordance with this Section 9.4(a) shall
constitute the dollar amount to be paid by Purchaser to Seller at the Closing
(the “Closing Payment”). Until one (1) Business Day before the Closing Date,
Purchaser shall have the opportunity to review and discuss the Preliminary
Closing Statement with Seller; provided, however, Seller shall not be required
to make any change thereto to which Seller does not reasonably
agree.




(b)           As
soon as reasonably practicable after the Closing but not later than ninety (90)
days following the Closing Date, Seller shall prepare and deliver to Purchaser a
statement (the “Final Closing Statement”) setting forth the final calculation of
the Agreed Purchase Price and showing the calculation of each adjustment, based,
to the extent possible, on actual credits, charges, receipts and other items
before and after the Effective Time and taking into account all adjustments
provided for in this Agreement (the “Final Purchase Price”). Seller shall, at
Purchaser’s request, supply reasonable documentation available to support any
credit, charge, receipt or other item.  Seller shall afford Purchaser
and its representatives the opportunity to review such statement and the
supporting schedules, analyses, work papers, and other underlying records or
documentation as are reasonably necessary and appropriate in Purchaser’s review
of such statement.  Each party shall cooperate fully and promptly with
the other and their respective representatives in such examination with respect
to all reasonable requests related thereto.  As soon as reasonably
practicable but not later than the one hundred twentieth (120th) day following
the Closing Date, Purchaser shall deliver to Seller a written report containing
any changes that Purchaser proposes be made to such statement. Seller and
Purchaser shall undertake to agree on the final statement of the Final Purchase
Price no later than one hundred fifty (150) days after the Closing Date (the
“Final Settlement Date”).  Unless the parties are unable to reach
agreement on the Final Closing Statement on or before the Final Settlement Date,
then on the Final Settlement Date, (x) Purchaser shall pay to Seller the amount
by which the Final Purchase Price exceeds the Closing Payment or (y) Seller
shall pay to Purchaser the amount by which the Closing Payment exceeds the Final
Purchase Price, as applicable (in either case, the “Final
Adjustment”).




In the
event that Seller and Purchaser cannot reach agreement by the Final Settlement
Date, either party may refer the remaining matters in dispute to a
nationally-recognized independent accounting firm as may be mutually accepted by
Purchaser and Seller, for review and final determination (the “Agreed Accounting
Firm”).  If issues are submitted to the Agreed


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Accounting
Firm for resolution, Seller and Purchaser shall each enter into a customary
engagement letter with the Agreed Accounting Firm at the time the issues
remaining in dispute are submitted to the Agreed Accounting Firm.  The
Agreed Accounting Firm will be directed to (i) review the statement setting
forth Seller’s calculation of the Final Purchase Price and the records relating
thereto only with respect to items identified by Purchaser in its written report
containing changes to such statement that remain disputed immediately following
the Final Settlement Date and (ii) determine the final
adjustments.  Each party shall furnish the Agreed Accounting Firm such
work papers and other records and information relating to the objections in
dispute as the Agreed Accounting Firm may reasonably request and that are
available to such party or its Affiliates (and such parties’ independent public
accountants).  The parties will, and will cause their representatives
to, cooperate and assist in the conduct of any review by the Agreed Accounting
Firm, including, but not limited to, making available books, records and, as
available, personnel as reasonably required.  The Agreed Accounting
Firm shall conduct the arbitration proceedings in Houston, Texas in accordance
with the Commercial Arbitration Rules of the American Arbitration Association,
to the extent such rules do not conflict with the terms of this Section 9.4.  The
Agreed Accounting Firm’s determination shall be made within thirty (30) days
after submission of the matters in dispute and shall be final and binding on
both parties, without right of appeal and such decision shall constitute an
arbitral award upon which a judgment may be entered by a court having
jurisdiction thereof.  In determining the proper amount of any
adjustment to the Final Purchase Price, the Agreed Accounting Firm shall not
increase the Final Purchase Price more than the increase proposed by Seller nor
decrease the Final Asset Value more than the decrease proposed by Purchaser, as
applicable, and may not award damages or penalties to either party with respect
to any matter. Seller and Purchaser shall each bear its own legal fees and other
costs of presenting its case. Each party shall bear one-half of the costs and
expenses of the accounting firm.  Within ten (10) Business Days after
the date on which the parties or the Agreed Accounting Firm, as applicable,
finally determines the disputed matters and have executed the final settlement
statement, (x) Purchaser shall pay to Seller the amount by which the Final
Purchase Price exceeds the Closing Payment or (y) Seller shall pay to Purchaser
the amount by which the Closing Payment exceeds the Final Purchase Price, as
applicable. Any post-Closing payment pursuant to this Section 9.4(b) shall bear
interest at the Agreed Interest Rate from (but not including) the Closing Date
to (and including) the date both Purchaser and Seller have executed the final
settlement statement.  The Parties acknowledge that it is not the
intent of this Agreement that either Party be deprived of material amounts of
revenue or be burdened by material amounts of expense until the final adjustment
pursuant to Section
9.4(b).  If at any time after Closing either Party believes it is
owed material revenues or material expense reimbursement, which revenues and
expense reimbursement owed shall be netted against revenues and expenses due the
other Party, it may request payment from the other Party, not more frequently
than monthly, and such Party shall make payment of any undisputed amounts within
a commercially reasonable period of time.  For purposes of the immediately
proceeding sentence, material shall mean an amount in excess of
$1,000,000.




(c)           All
payments made or to be made hereunder to Seller shall be by electronic transfer
of immediately available funds to the account of Seller as may be specified by
Seller in writing. All payments made or to be made hereunder to Purchaser shall
be by electronic transfer of immediately available funds to a bank and account
specified by Purchaser in writing to Seller.  Upon execution of the
Final Closing Statement by the parties and the payment of the Final


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Adjustment
by one party to the other, neither party shall have any further obligation to
for any additional adjustments to the Purchase Price under Section 2.2.




ARTICLE
10


TERMINATION




Section
10.1                    Termination.




This
Agreement may be terminated and the transactions contemplated hereby abandoned
at any time prior to the Closing:




(a)           by
mutual written consent of Seller and Purchaser;




(b)           by
either Seller or Purchaser, if:




(i)
            the
      Closing shall not have occurred on or before March 1, 2010 (the
      “Termination Date”); provided, however, that the right to terminate this
      Agreement under this Section 10.1(b)(i) shall
      not be available (A) to Seller, if any breach of this Agreement by Seller
      has been the principal cause of, or resulted in, the failure of the
      Closing to occur on or before the Termination Date or (B) to Purchaser, if
      any breach of this Agreement by Purchaser has been the principal cause of,
      or resulted in, the failure of the Closing to occur on or before the
      Termination Date; or




(ii)
            there
      shall be any Law that makes consummation of the transactions contemplated
      hereby illegal or otherwise prohibited or a Governmental Body shall have
      issued an order, decree, or ruling or taken any other action permanently
      restraining, enjoining, or otherwise prohibiting the consummation of the
      transactions contemplated hereby, and such order, decree, ruling, or other
      action shall have become final and non
  appealable;




(c)           by
Seller, if (i) any of the representations and warranties of Purchaser contained
in this Agreement shall not be true and correct in all material respects
(provided that any such representation or warranty that is already qualified by
a materiality standard or a material adverse effect qualification shall not be
further qualified); or (ii) Purchaser shall have failed to fulfill in any
material respect any of its obligations under this Agreement; and, in the case
of each of clauses (i) and (ii), such misrepresentation, or breach of warranty,
if curable, has not been cured within ten (10) days after written notice thereof
from Seller to Purchaser; provided that any cure period shall not extend beyond
the Termination Date and shall not extend the Termination Date; or




(d)           by
Purchaser, if (i) any of the representations and warranties of Seller contained
in this Agreement shall not be true and correct in all material respects
(provided that any such representation or warranty that is already qualified by
a materiality or Material Adverse Effect qualification shall not be further
qualified); or (ii) Seller shall have failed to fulfill in any material respect
any of its obligations under this Agreement, and, in the case of each of clauses
(i) and (ii), such misrepresentation, breach of warranty or failure, if curable,
has not been cured


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within
ten (10) days after written notice thereof from Purchaser to Seller; provided
that any cure period shall not extend beyond the Termination Date and shall not
extend the Termination Date.




Section
10.2                    Effect of
Termination.




If this
Agreement is terminated pursuant to Section 10.1, this Agreement
shall become void and of no further force or effect (except for the provisions
of Section 4.4, Section
5.6, Section
6.5,Section
7.5,Section
11.8, Section 11.9and Section 11.10of this
Agreement and this Article
10, the Section entitled “Definitions,” and Article 12  all of
which shall continue in full force and effect).  Notwithstanding the
foregoing, nothing contained in this Section 10.2 shall relieve any
party from liability for Losses resulting from its breach of this
Agreement.




Section
10.3                    Distribution
of Deposit Upon Termination.




(a)           If
Seller terminates this Agreement (i) because Purchaser has failed to comply with
any provision ofSections
8.1(a),8.1(b), 8.1(d),
8.1(g), or 8.1(h);or (ii) as the result of
any default or breach by Purchaser of Purchaser’s obligations hereunder, and if
Seller is not then in default in any material respect under this Agreement, then
Seller may retain the Deposit with any earned interest, as its sole and
exclusive remedy as liquidated damages, free of any claims by Purchaser or any
other Person with respect thereto.  It is expressly stipulated by the
parties that the actual amount of damages resulting from such a termination
would be difficult if not impossible to determine accurately because of the
unique nature of this Agreement, the unique nature of the Assets, the
uncertainties of applicable commodity markets and differences of opinion with
respect to such matters, and that the liquidated damages provided for herein are
a reasonable estimate by the parties of such damages.




(b)           If
this Agreement is terminated for any reason other than the reasons set forth
inSection 10.3(a),then Seller shall
deliver the Deposit to Purchaser without interest thereon, free of any claims by
Seller or any other Person with respect thereto after Purchaser has satisfied
any remaining obligations hereunder.




(c)           Notwithstanding
anything to the contrary in this Agreement, Purchaser shall not be entitled to
receive interest on the Deposit, whether the Deposit is applied against the
Purchase Price or returned to Purchaser pursuant to thisSection 10.3.




ARTICLE
11


POST-CLOSING
OBLIGATIONS; INDEMNIFICATION;


LIMITATIONS;
DISCLAIMERS AND WAIVERS




Section
11.1                    Assumed
Seller Obligations.




Subject
to the indemnification by Seller under Section 11.3andSection
11.12, on the Closing Date, Purchaser shall assume and hereby agrees to
fulfill, perform, pay and discharge (or cause to be fulfilled, performed, paid
or discharged) all of the obligations and liabilities of Seller, known or
unknown, with respect to the Assets, regardless of whether such obligations or
liabilities arose prior to, on or after the Effective Time, including but not
limited to obligations to (a) furnish makeup gas according to the terms of
applicable gas sales, gathering or transportation contracts, and to satisfy all
other gas balancing obligations, if any, (b) pay working interests,


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royalties,
overriding royalties and other interests held in suspense, (c) properly plug and
abandon any and all wells (including, without limitation, the Wells), including
inactive wells or temporarily abandoned wells, drilled on the Properties, as
required by Law, (d) replug any well, wellbore, or previously plugged well on
the Properties to the extent required by Governmental Body, (e) dismantle,
salvage and remove any equipment, structures, materials, platforms, flow lines,
and property of whatever kind related to or associated with operations and
activities conducted on the Properties, (f) clean up, restore and/or remediate
the premises covered by or related to the Assets in accordance with applicable
agreements and Laws, (g) pay all Property Costs, (h) perform all obligations
applicable to or imposed on the lessee, owner, or operator under the Leases or
with respect to the Mineral Interests and related contracts, or as required by
applicable Laws (all of said obligations and liabilities, subject to the
exclusions below, herein being referred to as the “Assumed Seller Obligations”);
provided, however, that the Assumed Seller Obligations shall not include, and
Purchaser shall have no obligation to assume, any obligations or liabilities of
Seller to the extent that they are (such excluded obligations and liabilities,
the “Excluded Seller Obligations”):




(i)
            attributable
      to or arise out of the Excluded
Assets;




(ii)
            attributable
      to or arising out of the actions, suits or proceedings, if any, set forth
      on Schedule
      5.7(a), except in so far as they are attributable to or relate to
      the Assets for periods after the Effective
Time;




(iii)
            Retained
      Employee Liabilities; and




(iv)
            Any
      improper disposal by Seller of materials regulated by Environmental Laws
      that were removed from the Assets and disposed of at a location other than
      the Assets.




Section
11.2                    Survival.




(a)           All
representations and warranties of Seller and Purchaser contained herein shall
expire on the date that is one hundred twenty (120) days after the Closing Date
(the “Indemnity End Date”); provided, however, that the representations and
warranties contained in Section
5.3, Section 5.4,
Section 5.6, Section 5.8, Section 6.2, Section 6.3,andSection 6.5(collectively,
the “Fundamental Representations”)shall survive until the
end of six months following the expiration of the applicable statute of
limitations period.  Upon the termination of a representation or
warranty in accordance with the foregoing, such representation or warranty shall
have no further force or effect for any purpose under this
Agreement.  The covenants and other agreements of Seller and Purchaser
set forth in this Agreement shall survive the Closing Date until fully
performed.




(b)           No
party hereto shall have any indemnification obligation pursuant to this Article 11 or otherwise
hereunder unless it shall have received from the party seeking indemnification a
written notice (a “Claim Notice”) of the existence of the claim for or in
respect of which indemnification is being sought hereunder on or before the
expiration of the applicable survival period set forth in Section 11.2(a).  If
an Indemnified Party delivers a Claim Notice with respect to a representation or
warranty to an Indemnifying Party before the expiration of the
applicable


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survival
period set forth in Section
11.2(a), then the applicable representation or warranty shall survive
until, but only for purposes of, the resolution of the matter covered by such
Claim Notice.  A Claim Notice shall set forth with reasonable
specificity (1) the basis for such claim under this Agreement, and the facts
that otherwise form the basis of such claim and (2) to the extent reasonably
estimable, an estimate of the amount of such claim (which estimate shall not be
conclusive of the final amount of such claim) and an explanation of the
calculation of such estimate.




Section
11.3                    Indemnification
by Seller.




From and
after the Closing, subject to the terms and conditions of this Article 11(including, without
limitation, the survival and the timing requirement in Section 11.2) and subject to
Purchaser’s indemnification obligations with respect to its representations and
warranties herein, Seller shall jointly and severally indemnify, defend and hold
harmless Purchaser and its directors, officers, employees, stockholders,
members, agents, consultants, advisors and other representatives (including
legal counsel, accountants and financial advisors) and Affiliates and the
successors and permitted assigns of this Agreement of Purchaser (collectively,
the “Purchaser Indemnified Persons”) from and against any and all Losses
asserted against, resulting from, imposed upon, or incurred or suffered by any
Purchaser Indemnified Person to the extent resulting from, arising out of or
relating to:




(a)           any
breach of any representation of Seller contained in this Agreement or confirmed
in any certificate furnished by or on behalf of Seller in connection with this
Agreement REGARDLESS OF
FAULT;




(b)           any
breach or nonfulfillment of or failure to perform any covenant or agreement of
Seller contained in this AgreementREGARDLESS OF FAULT or
confirmed in any certificate furnished by or on behalf of Seller in connection
with this Agreement; and




(c)           any
Excluded Seller Obligations.




Section
11.4                    Indemnification
by Purchaser.




From and
after the Closing, subject to the adjustments to the Purchase Price for purposes
of the Closing Statements contained in Section 2.2and the terms and
conditions of this Article
11 (including, without limitation, the survival and timing requirements
of Section 11.2), and
subject to Seller’s indemnification obligations with respect to its
representations and warranty obligations herein, Purchaser shall indemnify,
defend and hold harmless Seller, Seller’s Affiliates, and each of their
respective managers, general partners, directors, officers, employees, agents,
consultants, equity owners, stockholders, advisors and other representatives
(including legal counsel, accountants and financial advisors), and Seller’s
predecessors-in-interest (all such persons referred to collectively as the
“Seller Indemnified Persons”) from and against any and all Losses, asserted
against, resulting from, imposed upon, or incurred or suffered by any Seller
Indemnified Person, directly or indirectly, to the extent resulting from,
arising out of, or relating to:


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(a)           any
breach of any representation of Purchaser contained in this Agreement or
confirmed in any certificate furnished by or on behalf of Purchaser to Seller in
connection with this Agreement REGARDLESS OF
FAULT;




(b)           any
breach or nonfulfillment of or failure to perform any covenant or agreement of
Purchaser contained in this Agreement REGARDLESS OF FAULT or
confirmed in any certificate furnished by or on behalf of Purchaser to Seller in
connection with this Agreement;




(c)           the
ownership, use or operation of the Assets including without limitation any and
all Property Costs (other than any Excluded Seller Obligations) whether before
or after the Effective Time;




(d)           the
Assumed Seller Obligations REGARDLESS OF
FAULT;




(e)           Environmental
Laws, Environmental Liabilities, the release of materials into the environment
or protection of human health, safety, natural resources or the environment, or
any other environmental condition of the Assets, REGARDLESS OF FAULT;
and




(f)           Any
other indemnity obligations of Purchaser contained herein, including without
limitation, Section
4.4.




Section
11.5                    Indemnification
Proceedings.




(a)           In
the event that any claim or demand for which Seller or Purchaser (such Person,
an “Indemnifying Party”) may be liable to a Purchaser Indemnified Person under
Section 11.3 or to an
Seller Indemnified Person under Section 11.4 (an “Indemnified
Party”) is asserted against or sought to be collected from an Indemnified Party
by a third party, other than to the extent a claim is sought under Section 11.12 (a “Third Party
Claim,”) the Indemnified Party shall with reasonable promptness notify the
Indemnifying Party of such Third Party Claim by delivery of a Claim Notice,
provided that the failure or delay to so notify the Indemnifying Party shall not
relieve the Indemnifying Party of its obligations under this Article 11, except (and
solely) to the extent that the Indemnifying Party demonstrates that its defense
of such Third Party Claim is actually and materially prejudiced
thereby.  The Indemnifying Party shall have thirty (30) days from
receipt of the Claim Notice from the Indemnified Party (in this Section 11.5, the “Notice
Period”) to notify the Indemnified Party whether or not the Indemnifying Party
desires, at the Indemnifying Party’s sole cost and expense, to defend the
Indemnified Party against such claim or demand; provided, that the Indemnified
Party is hereby authorized prior to and during the Notice Period, and at the
cost and expense of the Indemnifying Party, to file any motion, answer or other
pleading that it shall reasonably deem necessary to protect its interests or
those of the Indemnifying Party.  The Indemnifying Party shall have
the right to assume the defense of such Third Party Claim only if and for so
long as the Indemnifying Party (i) notifies the Indemnified Party during the
Notice Period that the Indemnifying Party is assuming the defense of such Third
Party Claim, (ii) uses counsel of its own choosing that is reasonably
satisfactory to the Indemnified Party, and (iii) conducts the defense of such
Third Party Claim in an active and diligent manner.  If the
Indemnifying Party is entitled to, and does, assume the defense of any such
Third Party Claim, the Indemnified Party shall have the right to employ separate
counsel at its own expense and to participate in the defense thereof; provided,
however, that


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notwithstanding
the foregoing, the Indemnifying Party shall pay the reasonable attorneys’ fees
of the Indemnified Party if the Indemnified Party’s counsel shall have advised
the Indemnified Party that there is a conflict of interest that could make it
inappropriate under applicable standards of professional conduct to have common
counsel for the Indemnifying Party and the Indemnified Party (provided that the
Indemnifying Party shall not be responsible for paying for more than one
separate firm of attorneys and one local counsel to represent all of the
Indemnified Parties subject to such Third Party Claim).  If the
Indemnifying Party elects (and is entitled) to assume the defense of such Third
Party Claim, (i) no compromise or settlement thereof or consent to any admission
or the entry of any judgment with respect to such Third Party Claim may be
effected by the Indemnifying Party without the Indemnified Party’s written
consent (which shall not be unreasonably withheld, conditioned or delayed)
unless the sole relief provided is monetary damages that are paid in full by the
Indemnifying Party (and no injunctive or other equitable relief is imposed upon
the Indemnified Party) and there is an unconditional provision whereby each
plaintiff or claimant in such Third Party Claim releases the Indemnified Party
from all liability with respect thereto and (ii) the Indemnified Party shall
have no liability with respect to any compromise or settlement thereof effected
without its written consent (which shall not be unreasonably
withheld).  If the Indemnifying Party elects not to assume the defense
of such Third Party Claim (or fails to give notice to the Indemnified Party
during the Notice Period or otherwise is not entitled to assume such defense),
the Indemnified Party shall be entitled to assume the defense of such Third
Party Claim with counsel of its own choice, at the expense and for the account
of the Indemnifying Party; provided, however, that the Indemnified Party shall
make no settlement, compromise, admission, or acknowledgment that would give
rise to liability on the part of any Indemnifying Party without the prior
written consent of such Indemnifying Party, which consent shall not be
unreasonably withheld, conditioned or delayed.




(b)           Notwithstanding
the foregoing, the Indemnifying Party shall not be entitled to control (but
shall be entitled to participate at its own expense in the defense of), and the
Indemnified Party, shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any Third Party Claim
(i) at the reasonable expense of the Indemnifying Party, as to which the
Indemnifying Party fails to assume the defense during the Notice Period after
the Indemnified Party gives notice thereof to the Indemnifying Party or (ii) at
the reasonable expense of the Indemnifying Party, to the extent the Third Party
Claim seeks an order, injunction, or other equitable relief against the
Indemnified Party which, if successful, could materially adversely affect the
business, condition (financial or other), capitalization, assets, liabilities,
results of operations or prospects of the Indemnified Party.  The
Indemnified Party shall make no settlement, compromise, admission, or
acknowledgment that would give rise to liability on the part of the Indemnifying
Party without the prior written consent of the Indemnifying Party (which consent
shall not be unreasonably withheld, conditioned or delayed).




(c)           In
any case in which an Indemnified Party seeks indemnification hereunder and no
Third Party Claim is involved, the Indemnified Party shall deliver a Claim
Notice to the Indemnifying Party within a reasonably prompt period of time after
an officer of such Indemnified Party or its Affiliates has obtained knowledge of
the Loss giving rise to indemnification hereunder.  The failure or
delay to so notify the Indemnifying Party shall not relieve the Indemnifying
Party of its obligations under this Article 11except to the
extent such


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failure
results in insufficient time being available to permit the Indemnifying Party to
effectively mitigate the resulting Losses or otherwise prejudices the
Indemnifying Party.




(d)           Neither
Seller nor Purchaser shall have any liability for any indemnification under
Section 11.3(a) or Section 11.4(a) resulting from
a breach of representation or warranties until and unless the amount of the
liability for any individual claim or series of claims arising out of the same
or similar set of facts for which a Claim Notice is delivered by Purchaser or
Seller, as applicable, exceeds $50,000.




Section
11.6                    Limitations
on Indemnities.




Solely
for purposes of calculating the amount of Losses incurred arising out of or
relating to any breach or inaccuracy of a representation or warranty (and not
for determining whether a breach has occurred), the references to “Material
Adverse Effect” or other materiality qualifications (or correlative terms) shall
be disregarded.




Section
11.7                    Release.




EXCEPT
WITH RESPECT TO POST-CLOSING REMEDIATION AGREED TO PURSUANT TO SECTION 4.3 (IF
ANY), AND CLAIMS OR DEMANDS FOR WHICH A CLAIM NOTICE HAS BEEN SENT TO SELLER
PRIOR TO THE INDEMNITY END DATE, AT THE CLOSING PURCHASER HEREBY RELEASES,
REMISES AND FOREVER DISCHARGES THE SELLER INDEMNIFIED PERSONS FROM ANY AND ALL
CLAIMS, KNOWN OR UNKNOWN, WHETHER NOW EXISTING OR ARISING IN THE FUTURE,
CONTINGENT OR OTHERWISE, WHICH PURCHASER MIGHT NOW OR SUBSEQUENTLY MAY HAVE
AGAINST THE SELLER INDEMNIFIED PERSONS, RELATING DIRECTLY OR INDIRECTLY TO THE
CLAIMS ARISING OUT OF OR INCIDENT TO ENVIRONMENTAL LAWS, ENVIRONMENTAL
LIABILITIES, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT OR PROTECTION OF
HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, INCLUDING, WITHOUT
LIMITATION, RIGHTS TO CONTRIBUTION UNDER CERCLA, REGARDLESS OF
FAULT.




Section
11.8                    Disclaimers.




(a)           EXCEPT AS AND TO THE EXTENT EXPRESSLY
SET FORTH IN THIS AGREEMENT, OR CONFIRMED IN THE CERTIFICATE OF SELLER TO BE
DELIVERED PURSUANT TO SECTION 9.2(c), IN THE CONVEYANCE, (I) SELLER MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS, STATUTORY OR IMPLIED, AND (II) SELLER
EXPRESSLY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION,
WARRANTY, STATEMENT OR INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING)
TO PURCHASER OR ANY OF ITS AFFILIATES, EMPLOYEES, AGENTS, CONSULTANTS OR
REPRESENTATIVES (INCLUDING, WITHOUT LIMITATION, ANY OPINION, INFORMATION,
PROJECTION OR ADVICE THAT MAY HAVE BEEN PROVIDED TO PURCHASER BY ANY OFFICER,
DIRECTOR, EMPLOYEE,


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AGENT,
CONSULTANT, REPRESENTATIVE OR ADVISOR OF SELLER OR ANY OF ITS
AFFILIATES.




(b)           EXCEPT AS EXPRESSLY REPRESENTED
OTHERWISE IN ARTICLE 5 OF THIS AGREEMENT, OR CONFIRMED IN THE CERTIFICATE OF
SELLER TO BE DELIVERED PURSUANT TO SECTION 9.2(c), IN THE CONVEYANCE, AND
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLER EXPRESSLY DISCLAIMS ANY
REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, AS TO (I) TITLE TO
ANY OF THE ASSETS, (II) THE CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE
MEMORANDUM, OR ANY REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT, OR ANY
GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE ASSETS, (III) THE
QUANTITY, QUALITY OR  RECOVERABILITY OF PETROLEUM SUBSTANCES IN OR
FROM THE ASSETS, (IV) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE
REVENUES GENERATED BY THE ASSETS, (V) THE PRODUCTION OF HYDROCARBONS FROM THE
ASSETS, (VI) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR
MARKETABILITY OF THE ASSETS, (VII) THE CONTENT, CHARACTER OR NATURE OF ANY
DESCRIPTIVE MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY
THIRD PARTIES, (VIII) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE
AVAILABLE OR COMMUNICATED TO PURCHASER OR ITS AFFILIATES, OR ITS OR THEIR
EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR
PRESENTATION RELATING THERETO, AND FURTHER DISCLAIMS ANY REPRESENTATION OR
WARRANTY, EXPRESS, STATUTORY OR IMPLIED, OF MERCHANTABILITY, FREEDOM FROM
REDHIBITORY VICES OR DEFECTS (INCLUDING THOSE CONTEMPLATED IN LOUISIANA CIVIL
CODE ARTICLES 2475, AND 2520 THROUGH 2548), FITNESS FOR A PARTICULAR PURPOSE OR
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY EQUIPMENT, IT BEING
EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETO THAT PURCHASER SHALL BE
DEEMED TO BE OBTAINING THE ASSETS IN THEIR PRESENT STATUS, CONDITION AND STATE
OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS AND THAT PURCHASER HAS MADE OR
CAUSED TO BE  MADE SUCH INSPECTIONS AS PURCHASER DEEMS APPROPRIATE, OR
(IX) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK
INFRINGEMENT.




(c)           EXCEPT AS EXPRESSLY REPRESENTED
OTHERWISE IN ARTICLE 5, SELLER HAS NOT AND WILL NOT MAKE ANY REPRESENTATION OR
WARRANTY REGARDING ANY MATTER OR CIRCUMSTANCE RELATING TO ENVIRONMENTAL LAWS,
ENVIRONMENTAL LIABILITIES, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT OR THE
PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, OR ANY
OTHER ENVIRONMENTAL CONDITION OF THE ASSETS, AND NOTHING IN THIS AGREEMENT OR
OTHERWISE SHALL BE CONSTRUED AS SUCH A REPRESENTATION OR WARRANTY, AND PURCHASER
SHALL BE DEEMED TO


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BE
TAKING THE ASSETS “AS IS” AND “WHERE IS” FOR PURPOSES OF THEIR ENVIRONMENTAL
CONDITION.




Section
11.9                    Recording.




As soon
as practicable after Closing, Purchaser shall record the Conveyances in the
appropriate counties and/or parishes and provide Seller with copies of all
recorded or approved instruments.  The Conveyances are intended to
convey all of the Properties being conveyed pursuant to this
Agreement.  Certain Properties or specific portions of the Properties
that are leased from, or require the approval to transfer by, a Governmental
Body are conveyed under the Conveyances and also are described and covered by
other separate assignments made by Seller to Purchaser on officially approved
forms, or forms acceptable to such entity, in sufficient multiple originals to
satisfy applicable statutory and regulatory requirements.  The
interests conveyed by such separate assignments are the same, and not in
addition to, the interests conveyed in the Conveyances attached as Exhibit B.  Further,
such assignments shall be deemed to contain the special warranty of title of
Seller and all of the exceptions, reservations, rights, titles, power and
privileges set forth herein and in the Conveyances as fully and only to the
extent as though they were set forth in each such separate
assignment.




Section
11.10Non-Compensatory
Damages.




None of
the Purchaser Indemnified Parties nor Seller Indemnified Parties shall be
entitled to recover from Seller or Purchaser, or their respective Affiliates,
any indirect, consequential, punitive or exemplary damages or damages for lost
profits of any kind arising under or in connection with this Agreement or the
transactions contemplated hereby, except to the extent any such party suffers
such damages (including costs of defense and reasonable attorney’s fees incurred
in connection with defending of such damages) to a Third Party, which damages
(including costs of defense and reasonable attorney’s fees incurred in
connection with defending against such damages) shall not be excluded by this
provision as to recovery hereunder.  Subject to the preceding
sentence, Purchaser, on behalf of each of the Purchaser Indemnified Parties, and
Seller, on behalf of each of Seller Indemnified Parties, waive any right to
recover punitive, special, exemplary and consequential damages, including
damages for lost profits, arising in connection with or with respect to this
Agreement or the transactions contemplated hereby.




Section
11.11Disclaimer of Application
of Anti-Indemnity Statutes.




The
parties acknowledge and agree that the provisions of any anti-indemnity statute
relating to oilfield services and associated activities shall not be applicable
to this Agreement and/or the transactions contemplated hereby.




Section
11.12                  Tax
Indemnification .




(a)           Seller
shall be liable for, and covenants and agrees to indemnify and hold harmless the
Purchaser and its Affiliates from and against, any and all liabilities incurred
by Purchaser or its Affiliates for Taxes for which Seller bears responsibility
pursuant to Section 1.4(c)hereof.


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(b)           Purchaser
shall be liable for, and covenants and agrees to indemnify and hold harmless
Seller and its Affiliates from and against, any and all liabilities incurred by
any of Seller or its Affiliates for Taxes for which Purchaser bears
responsibility pursuant to Section 1.4(c) andSection 12.3 of this
Agreement.




(c)           If
a party (the “Tax
Indemnified Party”) determines that it or any of its Affiliates is or may
be entitled to indemnification by another Party (the “Tax Indemnifying
Party”) under Section
11.12(a) or 11.12(b) hereof, the Tax Indemnified Party will promptly
deliver to the Tax Indemnifying Party a written notice and demand therefor (the
“Tax Notice”)
specifying the basis for indemnification and, if known, the amount for which the
Tax Indemnified Party reasonably believes it or any of its Affiliates is
entitled to be indemnified (a “Tax Claim”), together
with any supporting documentation (including, if applicable, any relevant notice
from any Taxing Authority).  The Tax Notice must be received by the
Tax Indemnifying Party no later than thirty (30) days before the expiration of
the applicable Tax statute of limitations; provided, however, that if the
Tax Indemnified Party does not receive notice from the applicable Taxing
Authority (“Taxing
Authority Notice”) that an item exists that could give rise to a Tax
Claim more than thirty (30) days before the expiration of the applicable Tax
statute of limitations, then the Tax Notice must be received by the Tax
Indemnifying Party as promptly as practicable after the Tax Indemnified Party
receives the Taxing Authority Notice (but in no event more than five (5)
Business Days after the Tax Indemnified Party receives the Taxing Authority
Notice).  If the Tax Indemnifying Party objects to the Tax Claim in
the manner set forth in Section
11.12(d) hereof, then the Tax Indemnifying Party shall not be liable to
make an indemnification payment to the Tax Indemnified Party until there is a
determination by the Agreed Accounting Firm or a Final Determination regarding
the Tax Claim, as the case may be, and any such indemnification payment will be
paid by the Tax Indemnifying Party to the Tax Indemnified Party in the amount
determined by the Agreed Accounting Firm or in the Final Determination regarding
the Tax Claim within thirty (30) days after the date of such determination or
Final Determination, as the case may be.  In all other cases, the Tax
Indemnifying Party will pay the Tax Indemnified Party the amount set forth in
the Taxing Authority Notice, in cash or other immediately available funds,
within thirty (30) days after receipt of the Taxing Authority Notice; provided, however, that if the
amount for which the Tax Indemnified Party reasonably believes it is entitled to
be indemnified is not known at the time of the Taxing Authority Notice, the Tax
Indemnifying Party shall pay the amount known to be due and the Tax Indemnified
Party will deliver to the Tax Indemnifying Party a further Taxing Authority
Notice specifying the unknown amount as soon as reasonably practicable after
such amount is known and payment will then be made as set forth
above.




(d)           The
Tax Indemnifying Party may object to the Tax Claim (or the amount thereof) set
forth in any Taxing Authority Notice by giving the Tax Indemnified Party, within
thirty (30) days following receipt of such Taxing Authority Notice, written
notice setting forth the Tax Indemnifying Party’s grounds for so objecting (the
“Tax Objection
Notice”).  If the Tax Indemnifying Party does not give the Tax
Indemnified Party the Tax Objection Notice within such thirty (30) day period,
the Tax Indemnified Party may exercise any and all of its rights under
applicable Law and this Agreement to collect such amount.




(e)           The
amount of a Tax Claim shall be the amount of Taxes payable by the Tax
Indemnified Party net of the present value of any anticipated benefit to the Tax
Indemnified


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Party or
any of its Affiliates attributable to any Tax item resulting from the facts
underlying such Tax Claim.




(f)          
 If the Tax Indemnified Party and the Tax Indemnifying Party are unable to
settle any dispute regarding a Tax Claim within thirty (30) days after receipt
of the Tax Objection Notice, the Tax Indemnified Party and the Tax Indemnifying
Party will jointly request the Agreed Accounting Firm to resolve the dispute as
promptly as possible.




(g)           Failure
by the Tax Indemnified Party to promptly deliver to the Tax Indemnifying Party a
Taxing Authority Notice in accordance with Section 11.12(c) hereof will
not relieve the Tax Indemnifying Party of any of its obligations under this
Agreement except to the extent the Tax Indemnifying Party is prejudiced by such
failure.




(h)           This
Section 11.12 shall
survive until the end of the six month period following the applicable statute
of limitations period.









ARTICLE
12


MISCELLANEOUS




Section
12.1                    Counterparts.




This
Agreement may be executed and delivered (including by facsimile transmission) in
counterparts, each of which shall be deemed an original instrument, but all such
counterparts together shall constitute but one agreement.




Section
12.2                    Notices.




All
notices which are required or may be given pursuant to this Agreement shall be
sufficient in all respects if given in writing and delivered personally, by
telecopy or by registered or certified mail, postage prepaid, as
follows:





If
      to Seller:
              Merit
      Energy Company13727
      Noel Road, Ste 500Dallas,
      Texas 75240Attention:   General
      CounselTelephone:  972-701-8377Telecopy:    972-960-1252With
      a copy to (which:
              Merit
      Energy Companyshall
      not constitute
              13727
      Noel Road, Ste. 500notice
      to Seller):
              Dallas,
      Texas 75240Attention:  Director
      – Acquisitions and DivestituresTelephone:  972-701-8377Telecopy:    972-960-1252If
      to Purchaser:
              Linn
      Energy Holdings, LLC600
      Travis Street, Ste. 1500




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Houston,
      Texas 77002
                Attn:
      Charlene A. Ripley, Sr. Vice President, General
                Counsel
      and Corporate Secretary




Either
party may change its address for notice by notice to the other in the manner set
forth above.  All notices shall be deemed to have been duly given at
the time of receipt by the party to which such notice is addressed.




Section
12.3                    Sales or
Use Tax Recording Fees and Similar Taxes and Fees.




Purchaser
shall bear any sales, use, excise, real property transfer, gross receipts, goods
and services, registration, capital, documentary, stamp or transfer Taxes,
recording fees and similar Taxes and fees (collectively “Transfer Taxes”)
incurred and imposed upon, or with respect to, the transactions contemplated by
this Agreement.  Seller will determine, and Purchaser will cooperate
with Seller in determining the amount of any Transfer Taxes, if any, that is due
in connection with the transactions contemplated by this Agreement and Purchaser
agrees to pay any such Transfer Tax to Seller or to the appropriate Governmental
Body.  If any of the transactions contemplated by this Agreement are
exempt from any such Transfer Taxes upon the filing of an appropriate
certificate or other evidence of exemption, Purchaser will timely furnish to
Seller such certificate or evidence.




Section
12.4                    Expenses.




Except as
otherwise expressly provided in Section 12.3, or
elsewhere in this Agreement, (a) all expenses incurred by Seller in connection
with or related to the authorization, preparation or execution of this
Agreement, the Conveyance delivered hereunder and the Exhibits and Schedules
hereto and thereto, and all other matters related to the Closing, including
without limitation, all fees and expenses of counsel, accountants and financial
advisers employed by Seller, shall be borne solely and entirely by Seller, and
(b) all such expenses incurred by Purchaser shall be borne solely and entirely
by Purchaser.




Section
12.5                    Change of
Name.




As
promptly as practicable, but in any case within ninety (90) days after the
Closing Date, Purchaser shall eliminate the names “Merit Energy Company”,
“Merit” and any variants thereof and any names of Seller’s Affiliates and any
variants thereof from the Assets acquired pursuant to this Agreement and, except
with respect to such grace period for eliminating existing usage, shall have no
right to use any logos, trademarks or trade names belonging to Seller or any of
its Affiliates.




Section
12.6                    Governing
Law and Venue.




THIS
AGREEMENT AND THE LEGAL RELATIONS BETWEEN THE PARTIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF


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THE STATE
OF TEXAS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS OTHERWISE APPLICABLE
TO SUCH DETERMINATIONS.




Section
12.7                    Captions.




The
captions in this Agreement are for convenience only and shall not be considered
a part of or affect the construction or interpretation of any provision of this
Agreement.




Section
12.8                    Waivers.




Any
failure by any party or parties to comply with any of its or their obligations,
agreements or conditions herein contained may be waived in writing, but not in
any other manner, by the party or parties to whom such compliance is owed. No
waiver of, or consent to a change in, any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of, or consent to a change in,
other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly
provided.  The rights of Seller and Purchaser under this Agreement
shall be cumulative and the exercise or partial exercise of any such right shall
not preclude the exercise of any other right.




Section
12.9                    Assignment.




No party
shall assign all or any part of this Agreement, nor shall any party assign or
delegate any of its rights or duties hereunder, without the prior written
consent of the other party.    Notwithstanding the
foregoing, Purchaser may, upon written notice to Seller, assign all or part of
its interest in this Agreement to one or more Affiliates of Purchaser, provided
that Purchaser shall remain responsible for any obligations hereunder including,
without limitation, the indemnification provisions of Article 11.  This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.




Section
12.10                  Entire
Agreement.




The
Confidentiality Agreement, this Agreement and the Exhibits and Schedules
attached hereto, and the documents to be executed hereunder constitute the
entire agreement between the parties pertaining to the subject matter hereof,
and supersede all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties pertaining to the subject
matter hereof.




Section
12.11                  Amendment.




(a)           This
Agreement may be amended or modified only by an agreement in writing executed by
the  parties hereto.




(b)           No
waiver of any right under this Agreement shall be binding unless executed in
writing by the party to be bound thereby.




Section
12.12                  No
Third-Party Beneficiaries.


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Nothing
in this Agreement shall entitle any Person other than Purchaser or Seller to any
claims, remedy or right of any kind, except as to those rights expressly
provided to the Seller Indemnified Persons and Purchaser Indemnified Persons
(provided, however, any claim for indemnity hereunder on behalf of an Seller
Indemnified Person or an Purchaser Indemnified Person must be made and
administered by a party to this Agreement).




Section
12.13                  References.




In this
Agreement:




(a)           References
to any gender includes a reference to all other genders;




(b)           References
to the singular includes the plural, and vice versa;




(c)           Reference
to any Article or Section means an Article or Section of this
Agreement;




(d)           Reference
to any Exhibit or Schedule means an Exhibit or Schedule to this Agreement, all
of which are incorporated into and made a part of this Agreement;




(e)           Unless
expressly provided to the contrary, “hereunder”, “hereof’, “herein” and words of
similar import are references to this Agreement as a whole and not any
particular Section or other provision of this Agreement;




(f)           “Include”
and “including” shall mean include or including without limiting the generality
of the description preceding such term; and




(g)           Capitalized
terms used herein shall have the meanings ascribed to them in this Agreement as
such terms are identified and/or defined in the Definitions section
hereof.




Section
12.14                  Construction.




Purchaser
is a party capable of making such investigation, inspection, review and
evaluation of the Assets as a prudent party would deem appropriate under the
circumstances including with respect to all matters relating to the Assets,
their value, operation and suitability. Each of Seller and Purchaser has had
substantial input into the drafting and preparation of this Agreement and has
had the opportunity to exercise business discretion in relation to the
negotiation of the details of the transactions contemplated hereby. This
Agreement is the result of arm’s-length negotiations from equal bargaining
positions.  In the event of a dispute over the meaning or application
of this Agreement, it shall be construed fairly and reasonably and neither more
strongly for nor against either party.




Section
12.15                  Conspicuousness.




The
parties agree that provisions in this Agreement in “bold” type satisfy any
requirements of the “express negligence rule” and any other requirements at law
or in equity that provisions be conspicuously marked or
highlighted.


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Section
12.16                  Severability.




If any
term or other provisions of this Agreement is held invalid, illegal or incapable
of being enforced under any rule of law, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in a materially adverse manner with respect to either party; provided,
however, that if any such term or provision may be made enforceable by
limitation thereof, then such term or provision shall be deemed to be so limited
and shall be enforceable to the maximum extent permitted by applicable
Law.




Section
12.17                  Time of
Essence.




Time is
of the essence in this Agreement.  If the date specified in this
Agreement for giving any notice or taking any action is not a Business Day (or
if the period during which any notice is required to be given or any action
taken expires on a date which is not a Business Day), then the date for giving
such notice or taking such action (and the expiration date of such period during
which notice is required to be given or action taken) shall be the next day
which is a Business Day.




Section
12.18                  Limitation
on Damages.




Notwithstanding
any other provision contained elsewhere in this Agreement to the contrary, the
parties acknowledge that this Agreement does not authorize one party to sue for
or collect from the other party its own punitive damages, or its own
consequential or indirect damages in connection with this Agreement and the
transactions contemplated hereby and each party expressly waives for itself and
on behalf of its Affiliates, any and all Claims it may have against the other
party for its own such damages in connection with this Agreement and the
transactions contemplated hereby.




Section
12.19                  Access for Financial
Reporting Purposes.




At the Closing, Seller acknowledges
that Purchaser and/or its Affiliates may be required to include statements of
revenues and direct operating expenses and other financial information relating
to the Assets (“Financial Statements”) in documents filed with the SEC by
Purchaser and/or its Affiliates pursuant to the Securities Act of 1933, as
amended, and that such Financial Statements may be required to be
audited.  In that regard, Seller shall provide Purchaser reasonable
access to such records (to the extent such information is available) and
personnel of Seller as Purchaser may reasonably request to enable Purchaser, and
its representatives and accountants, at Purchaser’s sole cost and expense, to
create and audit any Financial Statements that Purchaser deems
necessary.  Notwithstanding the foregoing, (i) Seller shall in no
event be required to create new records relating to the Assets and (ii) the
access to be provided to Purchaser pursuant to this Section 8.6 shall not
interfere with Seller’s ability to prepare its own financial statements or its
regular conduct of business and shall be made available during Seller’s normal
business hours.  If reasonably required to accomplish the foregoing,
and at the sole cost and expense of Purchaser, Seller will provide suitable
electronic detail in the form of lease operating statements by property
adequately supporting all statements provided.


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[SIGNATURES
BEGIN ON THE FOLLOWING PAGE]







45870756.5
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IN
WITNESS WHEREOF, this Agreement has been signed by each of the parties hereto on
the date first above written.




SELLER:







MERIT
MANAGEMENT PARTNERS I, L.P.


MERIT
MANAGEMENT PARTNERS II, L.P.


MERIT
MANAGEMENT PARTNERS III, L.P.


MERIT
ENERGY PARTNERS III, L.P.





By:          Merit
Management Partners GP, LLC,


its general partner





By: /s/ Christopher S.
Hagge




Name: Christopher S.
Hagge


Title:
Assistant
Secretary





MERIT
ENERGY PARTNERS D-III, L.P.





By:          Merit
Management Partners I, L.P.,


its
general partner





By:          Merit
Management Partners GP, LLC,


its general partner





By: /s/ Christopher S.
Hagge


Name: Christopher S.
Hagge


Title:
Assistant
Secretary





MERIT
ENERGY PARTNERS E-III, L.P.





By:          Merit
Management Partners II, L.P.,


its
general partner





By:           Merit
Management Partners GP, LLC,


its general
partner





By: /s/ Christopher S.
Hagge


Name: Christopher S.
Hagge


Title:
Assistant
Secretary





60








MERIT
ENERGY PARTNERS F-III, L.P.





By:           Merit
Management Partners III, L.P.,


its
general partner





By:          Merit
Management Partners GP, LLC,


its general partner





By: /s/ Christopher S.
Hagge


Name: Christopher S.
Hagge


Title: Assistant
Secretary















PURCHASER:




LINN
ENERGY HOLDINGS, LLC





By: /s/ Mark E.
Ellis


Name: Mark E.
Ellis


Title:
President &
COO




61


EXHIBIT
A


TO


PURCHASE
AND SALE AGREEMENT


DATED
NOVEMBER ___, 2009 BY AND BETWEEN


MERIT
MANAGEMENT PARTNERS I, L.P., ET AL, AS SELLER


AND


LINN ENERGY HOLDINGS, LLC, AS
PURCHASER





[LEASES]





62


EXHIBIT
A-1


TO


PURCHASE
AND SALE AGREEMENT


DATED
NOVEMBER ___, 2009 BY AND BETWEEN


MERIT
MANAGEMENT PARTNERS I, L.P., ET AL, AS SELLER


AND


LINN ENERGY HOLDINGS, LLC, AS
PURCHASER





[WELLS
AND UNITS]





63


EXHIBIT
B


TO


PURCHASE
AND SALE AGREEMENT


DATED
NOVEMBER ___, 2009 BY AND BETWEEN


MERIT
MANAGEMENT PARTNERS I, L.P., ET AL, AS SELLER


AND


LINN
ENERGY HOLDINGS, LLC, AS PURCHASER





FORM OF ASSIGNMENT,
CONVEYANCE AND BILL OF SALE




THIS ASSIGNMENT, CONVEYANCE AND BILL
OF SALE (this “Assignment”), is made and
entered this [___] day of [______], 2009, but is effective as of November 1,
2009, at 7:00 a.m. Central Daylight Time (the “Effective Time”), from [MERIT MANAGEMENT PARTNERS I, L.P.,
___________] [ALSO TO ADD NPI PARTNERSHIPS], all Delaware limited
partnerships (collectively, “Assignor”), whose addresses
are 13727 Noel Road, Suite 500, Dallas, Texas 75240, and Linn Energy Holdings,
LLC, a Delaware limited liability company (“Assignee”), whose address is
600 Travis Street, Ste. 5100, Houston, Texas 77002.




WITNESSETH:




This Assignment is made pursuant to the
terms of that certain Purchase and Sale Agreement dated October __, 2009 by and
among Merit Management Partners I, L.P., et al., and Assignee (the “Purchase and
Sale Agreement”).  All capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed to them in the
Purchase and Sale Agreement.





That Assignor, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
does hereby sell, transfer, assign, and convey to Assignees, all of Assignor’s
right, title, interest and estate, real or personal, recorded or unrecorded,
movable or immovable, tangible or intangible, in and to the following (less and
except the Excluded Assets, as such term is defined below) (collectively, the
“Assets”):





(a)           All
of (i) the oil and gas leases; subleases and other leaseholds; net profits
interests; carried interests; farmout rights; options; and other properties and
interests described on Exhibit A(collectively,
the “Leases”), together with each and every kind and character of right, title,
claim, and interest that Seller has in and to the lands covered by the Leases or
the lands currently pooled, unitized, communitized or consolidated therewith
(the “Lands”);




(b)           All
oil, gas, water, disposal or injection wells located on or associated with the
Lands, whether producing, shut-in, or abandoned, including the wells shown on
Exhibit A-1,
whether producing, shut-in, or temporarily abandoned (even to the extent not
located on the Lands) (collectively, the “Wells”);




(c)           All
interest of Seller derived from the Leases in or to any currently existing pools
or units which include any Lands or all or a part of any Leases or include any
Wells, including those pools or units shown on Exhibit A-1 (the “Units”;
the Units, together with the Leases,


64


Lands and
Wells, being hereinafter referred to as the “Properties”), and including all
interest of Seller derived from the Leases in production of Hydrocarbons from
any such Unit, whether such Unit production of Hydrocarbons comes from Wells
located on or off of a Lease, and all tenements, hereditaments and appurtenances
belonging to the Leases and Units;




(d)           All
contracts, agreements and instruments by which the Properties are bound, or that
relate to or are otherwise applicable to the Properties, only to the extent
applicable to the Properties rather than Seller’s other properties, including
but not limited to, operating agreements, unitization, pooling and
communitization agreements, declarations and orders, joint venture agreements,
farmin and farmout agreements, exploration agreements, participation agreements,
exchange agreements, transportation or gathering agreements, agreements for the
sale and purchase of oil, gas, casinghead gas or processing agreements to the
extent applicable to the Properties or the production of Hydrocarbons produced
in association therewith from the Properties, including those identified on
Schedule 1.2(d)(hereinafter collectively referred to as “Contracts”), but excluding any
master service agreements and any contracts, agreements and instruments to the
extent transfer is restricted by third-party agreement or applicable Law and the
necessary consents to transfer are not obtained pursuant to Section 7.7 and provided
that “Contracts” shall not include the instruments constituting the
Leases;




(e)           All
easements, permits, licenses, servitudes, rights-of-way, surface leases and
other surface rights (“Easements”) appurtenant to, and used or held for use in
connection with the Properties (including those identified on Schedule 1.2(e)), but
excluding any permits and other rights to the extent transfer is restricted by
third-party agreement or applicable Law and the necessary consents to transfer
are not obtained pursuant to Section 7.7;




(f)All equipment,
machinery, fixtures and other tangible personal property and improvements
located on the Properties owned by Seller and used or held for use primarily in
connection with the operation of the Properties (other than vehicles or vessels
which are addressed specifically by Section 1.2(k)) (collectively,
“Equipment”);




(g)           All
flow lines, pipelines, gathering systems and appurtenances thereto located on
the Properties or used, or held for use, in connection with the operation of the
Properties, including those identified on Schedule 1.2(g) (“Pipelines”
and, together with the Equipment and Wells, “Personal Property”);




(h)           All
Hydrocarbons produced from or attributable to the Leases, Lands, and Wells from
and after the Effective Time;




(i)All
Imbalances;




(j)All lease files;
land files; well files; gas and oil sales contract files; gas processing files;
division order files; abstracts; title opinions; land surveys; logs; maps;
engineering data and reports; interpretive data, technical evaluations and
technical outputs; and other books, records, data, files, and accounting
records, in each case to the extent related to the Assets, or used or held for
use in connection with the maintenance or operation thereof, but excluding (i)
any books, records, data, files, logs, maps, evaluations, outputs, and
accounting records to the extent disclosure or transfer would result in a
violation of applicable Law or is restricted by any  65


Transfer
Requirement that is not satisfied pursuant to Section 7.7, (ii) computer or
communications software or intellectual property (including tapes, codes, data
and program documentation and all tangible manifestations and technical
information relating thereto), (iii) attorney-client privileged communications
and work product of Seller’s or any of its Affiliates’ legal counsel (other than
title opinions), (iv) reserve studies and evaluations, and (v) records relating
to the negotiation and consummation of the sale of the Assets (subject to such
exclusions, the “Records”); provided, however, that Seller may retain the
originals of such Records as Seller has reasonably determined may be required
for existing litigation, tax, accounting, and auditing purposes;




(k)           Those
vehicles and vessels specifically listed on Schedule 1.2(k);
and




(l)All Geological Data
specifically listed on Schedule
1.2(l).




provided,
however, that notwithstanding the foregoing, the Assets shall not include, and
Assignor hereby reserves and retains, all of the Excluded Assets.







TO HAVE AND TO HOLDto
Assignee, its successors and assigns, forever, subject to the Permitted
Encumbrances, as such term is defined in the Purchase and Sale Agreement, and
the other terms and provisions hereof and of the Purchase and Sale Agreement
referred to below.




This
Assignment is made by Assignor and accepted by Assignees subject to the
following terms and conditions:




1.           Effective
Time.  This Assignment shall be effective as of the Effective
Time.




2,           Purchase and Sale
Agreement.  This Assignment is expressly made subject to the
Purchase and Sale Agreement.  In the event of a conflict between this
Assignment and the Purchase and Sale Agreement, the Purchase and Sale Agreement
shall control.  Capitalized terms used and not otherwise defined
herein are used with the meanings given thereto in the Purchase and Sale
Agreement.




3.           Disclaimers.




EXCEPT
AS AND TO THE EXTENT EXPRESSLY SET FORTH IN SECTION 4 HEREOF OR IN ARTICLE 3 OF
THE PURCHASE AND SALE AGREEMENT, (i) ASSIGNOR MAKES NO REPRESENTATIONS OR
WARRANTIES, EXPRESS, STATUTORY OR IMPLIED, AND (ii) ASSIGNOR EXPRESSLY DISCLAIMS
ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT OR
INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO ASSIGNEE OR ANY OF
ASSIGNEE’S AFFILIATES, EMPLOYEES, AGENTS, CONSULTANTS OR REPRESENTATIVES
(INCLUDING, WITHOUT LIMITATION, ANY OPINION, INFORMATION, PROJECTION OR ADVICE
THAT MAY HAVE BEEN PROVIDED TO ASSIGNEE BY ANY OFFICER, DIRECTOR, EMPLOYEE,
AGENT, CONSULTANT, REPRESENTATIVE OR ADVISOR OF ASSIGNOR OR ANY OF ITS
AFFILIATES).  IN PARTICULAR, EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE
3 OF THE PURCHASE AND SALE AGREEMENT, AND WITHOUT LIMITING THE GENERALITY OF
THE


66


FOREGOING,
ASSIGNOR EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY
OR IMPLIED, AS TO (i) TITLE TO ANY OF THE ASSETS, (ii) THE CONTENTS, CHARACTER
OR NATURE OF ANY REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT, OR ANY
ENGINEERING, GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE
ASSETS, (iii) THE QUANTITY, QUALITY OR  RECOVERABILITY OF HYDROCARBONS
IN OR FROM THE ASSETS, (iv) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE
REVENUES GENERATED BY THE ASSETS, (v) THE PRODUCTION OF HYDROCARBONS FROM THE
ASSETS, (vi) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR
MARKETABILITY OF THE ASSETS, (vii) THE CONTENT, CHARACTER OR NATURE OF ANY
INFORMATION MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY
ASSIGNOR OR THIRD PARTIES WITH RESPECT TO THE ASSETS, (viii) ANY OTHER MATERIALS
OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE TO ASSIGNEE OR ITS AFFILIATES,
OR THEIR EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THE PURCHASE AND SALE AGREEMENT
OR ANY DISCUSSION OR PRESENTATION RELATING THERETO AND (ix) ANY IMPLIED OR
EXPRESS WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK
INFRINGEMENT.  EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE 4 HEREOF
ASSIGNOR FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR
IMPLIED, OF MERCHANTABILITY, FREEDOM FROM LATENT VICES OR DEFECTS, FITNESS FOR A
PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY
ASSETS, RIGHTS OF A ASSIGNEE UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF
CONSIDERATION OR RETURN OF THE PURCHASE PRICE, IT BEING EXPRESSLY UNDERSTOOD AND
AGREED BY THE PARTIES HERETO THAT ASSIGNEE SHALL BE DEEMED TO BE OBTAINING THE
ASSETS IN THEIR PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND
“WHERE IS” WITH ALL FAULTS OR DEFECTS (KNOWN OR UNKNOWN, LATENT, DISCOVERABLE OR
UNDISCOVERABLE), AND THAT ASSIGNEE HAS MADE OR CAUSED TO BE MADE SUCH
INSPECTIONS AS ASSIGNEE DEEMS APPROPRIATE.




Assignor
and Assignee agree that, to the extent required by applicable Law to be
effective, the disclaimers of certain representations and warranties contained
in this Section 3 are “conspicuous” disclaimers for the purpose of any
applicable Law.




4.           Special Warranty of
Title.  This Assignment is made, executed, and delivered
without warranty of title, either express or implied, even as to a return of the
purchase price, except that Assignor specially warrants and agrees to defend
Defensible Title, as such term is defined in the Purchase and Sale Agreement, to
the Assets against the claims and demand of all Persons claiming by, through, or
under Assignor or its Affiliates, but not otherwise, up to the Allocated Value
thereof and subject to the applicable limitations and provisions of Article 11
of the Purchase and Sale Agreement, but with full right of substitution and
subrogation of Assignee in and to all claims Assignor has or may have against
all preceding owners.


67


5.           Assumption by
Assignee.  In addition to their other obligations under this
Agreement, Assignee shall comply with all Laws, Leases, Applicable Contracts
(including all joint and unit operating agreements) and prevailing industry
standards relating to (i) the plugging, abandonment and/or replugging of all
Wells, including inactive Wells or temporarily abandoned Wells, included in the
Assets or otherwise drilled on the Lands, (ii) the dismantling or
decommissioning and removal of any Personal Property and other property of
whatever kind related to or associated with operations and activities conducted
by whomever on the Properties, or otherwise, pursuant to the Leases or
Applicable Contracts and (iii) the clean up, restoration and/or remediation of
the Lands covered by the Leases or related to the Assets (collectively, the
“P&A
Obligations”).  Subject to the indemnification by certain
members of Assignor under Section 11.3 of the Purchase and Sale Agreement, on
the Closing Date, Assignee shall assume and hereby agrees to fulfill, perform,
pay and discharge (or cause to be fulfilled, performed, paid or discharged) all
of the obligations and liabilities of Assignor, known or unknown, with respect
to the Assets, regardless of whether such obligations or liabilities arose prior
to, on or after the Effective Time, including but not limited to obligations to
(a) furnish makeup gas according to the terms of applicable gas sales, gathering
or transportation contracts, and to satisfy all other gas balancing obligations,
if any, (b) pay working interests, royalties, overriding royalties and other
interests held in suspense, (c) properly plug and abandon any and all wells
(including, without limitation, the Wells), including inactive wells or
temporarily abandoned wells, drilled on the Properties, as required by Law, (d)
replug any well, wellbore, or previously plugged well on the Properties to the
extent required by Governmental Body, (e) dismantle, salvage and remove any
equipment, structures, materials, platforms, flowlines, and property of whatever
kind related to or associated with operations and activities conducted on the
Properties, (f) clean up, restore and/or remediate the premises covered by or
related to the Assets in accordance with applicable agreements and Laws, (g)
perform all obligations applicable to or imposed on the lessee, owner, or
operator under the Leases or with respect to the Mineral Interests and related
contracts, or as required by applicable Laws (all of said obligations and
liabilities, subject to the exclusions below, herein being referred to as the
“Assumed Assignor
Obligations”); provided, however, that the Assumed Assignor Obligations
shall not include, and Assignee shall have no obligation to assume, any
obligations or liabilities of Assignor to the extent that they are (such
excluded obligations and liabilities, the “Excluded Assignor
Obligations”):




(i)attributable to or arise out of the
Excluded Assets;




(ii)           attributable
to or arising out of the actions, suits or proceedings, if any, set forth on
Schedule 5.7(a) of the Purchase and Sale Agreement, except in so far as they are
attributable to or relate to the Assets for periods after the Effective Time;
and




(iii)          Retained
Employee Liabilities.




6.           Further
Assignments.  Assignees acknowledge that this Assignment is a
global assignment intended for filing with the applicable counties and parishes
in Texas and Louisiana, and that Assignees and Assignor have separately entered
into multiple assignments for the purpose of recording the assignment of the
Assets with the Minerals Management Service.


68


7.           Covenants Running with the
Land.  The terms and provisions hereof shall be deemed to be
covenants running with the Lands, Leases, and other interests covered hereby and
shall extend to, bind and inure to the benefit of the parties hereto, their
heirs, successors and assigns.




[Signature
Page Follows]





69


IN WITNESS WHEREOF, this
Assignment is executed by the duly authorized officers or representatives of the
parties as of the date first hereinabove written.


ASSIGNOR:WITNESSES:
            
            MERIT
      MANAGEMENT PARTNERS I, L.P.Name:Title:Name:Title:Name:Title:Name:Title:










ASSIGNEE:WITNESSES:
            
            [_______________________]By:Name:Title:





STATE
      OF TEXAS
              §§COUNTY
      OF DALLAS
              §





BEFORE
ME, the undersigned Notary Public, on this day personally appeared [________],
known to me to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that he, being fully authorized to do so,
executed and delivered the same as [_______] of the above-listed affiliates of
Merit Management Partners GP, LLC, on the day and year therein mentioned and as
the act and deed of said corporation, for the purpose and consideration therein
expressed.




GIVEN
UNDER MY HAND AND SEAL OF OFFICE, this [__] day of [______], 2009.







____________________________________


Notary
Public








My
Commission Expires:_______________







EXHIBIT
C


TO


PURCHASE
AND SALE AGREEMENT


DATED
NOVEMBER ___, 2009 BY AND BETWEEN


MERIT
MANAGEMENT PARTNERS I, L.P., ET AL, AS SELLER


AND


LINN
ENERGY HOLDINGS, LLC, AS PURCHASER





FORM
OF INDEMNITY AGREEMENT





This Indemnity Agreement is executed on
_____________, 2009 (the “Effective Date”), by and among [Insert appropriate
Merit partnerships], each a Delaware limited partnership (together,
"Indemnifying Parties", individually, “Indemnifying Party”), and Linn Energy
Holdings, LLC, a Delaware limited liability company ("Indemnified
Party").





WHEREAS, Indemnifying Parties, as
seller, and Indemnified Party, as purchaser, entered into that certain Purchase
and Sale Agreement, dated November __, 2009, (the “PSA”); and





WHEREAS, pursuant to Section 3.4(d)(ii)
of the PSA, Indemnifying Parties desire to indemnify and hold Indemnified Party
harmless with respect to certain losses associated with certain Title Defects
(as defined in the PSA), as more fully set forth in this Agreement.





NOW, THEREFORE, in consideration of the
premises, covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:





1.           Indemnification
by Indemnifying Parties.  Indemnifying Parties
hereby indemnify and hold harmless the Indemnified Party from and against loss
of property value, as well as reasonable outside counsel attorney fees and other
actual and reasonable third-party costs and expenses of investigation and
litigation (“Losses”) arising out of or attributable toThird Party Claims (as defined below)
relating to the Title Defects identified on Exhibit A attached hereto and
incorporated herein by reference (individually, a “Subject Title Defect”,
collectively, the “Subject Title Defects”), up to the amount attributed to each
Subject Title Defect, which amount is also identified on Exhibit A (with respect
to each Subject Title Defect, the “Individual Defect Amount”, with respect to
the aggregate amount for all Subject Title Defects identified on Exhibit A, the
“Aggregate Defect Amount”).





2.Limits on
Indemnification, Dispute regarding Losses




(a)         Notwithstanding
anything in the PSA or this Agreement to the contrary, the Indemnified Party and
the Indemnifying Parties hereby agree and acknowledge that the Indemnified
Party’s sole and exclusive remedy with relation to Losses suffered by the
Indemnified Party relating to all Subject Title Defects shall be limited to the
Aggregate Defect Amount and with relation to Losses suffered by the Indemnified
Party regarding any individual Subject Title Defect shall be limited to the
corresponding Individual Defect Amount.


55
of 55


Additionally,
notwithstanding anything in the PSA or this Agreement to the contrary, the
Indemnified Party’s sole and exclusive remedy with respect to any and all
claims, liabilities, suits, controversies, losses, costs and expenses relating
to the Subject Title Defects shall be limited to a claim for reimbursement of
Losses pursuant to this Agreement. Each of the parties to this Agreement
expressly waives and agrees not to seek, and to cause its affiliates not to
seek, indirect, consequential, punitive or exemplary damages or damages for lost
profits of any kind with respect to any dispute arising under, related to, or in
connection with this Agreement or the Subject Title Defects.




(b)         For
purposes of calculating the amount of any Losses payable by the Indemnifying
Parties, the amount of such Losses shall be determined as agreed upon by the
Indemnifying Parties and the Indemnified Party with reference to the applicable
Individual Defect Amount in accordance with the terms of, and subject to the
limitations contained in, this Agreement and with regard to the portion of the
Individual Defect Amount that is affected by a Third Party Claim.  In
the event the parties to this Agreement are unable to agree upon the amount of
any Losses, the dispute shall be exclusively and finally resolved pursuant to
this Section2(b).
There shall be a single arbitrator, who shall be a title attorney with at least
ten (10) years experience in oil and gas titles involving properties in the
regional area in which the properties constituting the Subject Title Defect are
located, as selected by mutual agreement of the parties hereto (the "Title
Expert"). The Title Expert's determination shall be made within twenty
(20) days after submission of the matters in dispute and shall be final and
binding upon all parties to this Agreement, without right of appeal. In making
his determination, the Title Expert shall be bound by the rules and limitations
set forth in this Agreement and may consider such other matters as in the
opinion of the Title Expert are necessary or helpful to make a proper
determination. The Title Expert may allow the parties to make written
submissions of their positions in the manner and to the extent the Title Expert
deems appropriate, and the Title Expert may call on the parties to submit such
other materials as the Title Expert deems helpful and appropriate to resolution
of the dispute.  Additionally, the Title Expert may consult with and
engage disinterested third parties to advise the Title Expert, including without
limitation petroleum engineers. The parties hereto shall each bear its own legal
fees and other costs of presenting its case. Each party shall bear one-half of
the costs and expenses of the Title Expert, including any costs incurred by the
Title Expert that are attributable to such third party consultation. Within ten
(10) days after the Title Expert delivers written notice to the parties to
this Agreement of his award with respect to the disputed Losses, the
Indemnifying Parties shall pay to the Indemnified Party the amount, if any, so
awarded by the Title Expert to the Indemnified Party.




(c)         Claims by the
Indemnified Party for reimbursement for Losses pursuant to this Agreement shall
be limited to claims made within the Claim Period (as defined
below).  To the extent the Indemnified Party fails to notify the
Indemnifying Parties of any claims for reimbursement for Losses within the Claim
Period, the Indemnified Party shall be deemed to have waived any right to
reimbursement for any Losses or any other damages the Indemnified Party may have
suffered or incurred with respect to any such Subject Title Defect.




3.           Indemnification
Proceedings.


55
of 55


(a)        At any time prior to
the date which is four (4) years following the Effective Date (the “Claim
Period”), the Indemnified Party will have the right to notify the Indemnifying
Parties in writing that the Indemnified Party is making an indemnification claim
for reimbursement for any Losses incurred or reasonably anticipated to be
incurred with respect to any third party claim regarding title to or ownership
of an interest in a property which is identified as a Subject Title
Defect.  In the event that any third party makes a claim regarding
title to or ownership of an interest in a property which is identified as a
Subject Title Defect for which the Indemnifying Parties may be liable to the
Indemnified Party pursuant to Section 1 above (a "Third Party Claim"), the
Indemnified Party shall with reasonable promptness notify the Indemnifying
Parties of such Third Party Claim by delivery of a written notice to the
Indemnifying Parties (a “Claim Notice”), provided that the failure or delay to
so notify the Indemnifying Parties shall not relieve the Indemnifying Parties of
their obligations under this Agreement, except to the extent that the
Indemnifying Parties demonstrate that their defense of such Third Party Claim is
materially prejudiced thereby. The Indemnifying Parties shall have thirty
(30) days from receipt of the Claim Notice from the Indemnified Party (the
"Notice Period") to notify the Indemnified Party whether or not the Indemnifying
Parties desire, at the Indemnifying Parties' sole cost and expense, to defend
the Indemnified Party against such claim or demand; provided, that the
Indemnified Party is hereby authorized prior to and during the Notice Period,
and at the cost and expense of the Indemnifying Parties, to file any motion,
answer or other pleading that it shall reasonably deem necessary to protect its
interests or those of the Indemnifying Parties. The Indemnifying Parties shall
have the right to assume the defense of such Third Party Claim only if and for
so long as the Indemnifying Parties (i) notify the Indemnified Party during
the Notice Period that the Indemnifying Parties are assuming the defense of such
Third Party Claim, (ii) use counsel of its own choosing that is reasonably
satisfactory to the Indemnified Party, and (iii) conduct the defense of
such Third Party Claim in an active and diligent manner. If the Indemnifying
Parties are entitled to, and do, assume the defense of any such Third Party
Claim, the Indemnified Party shall have the right to employ separate counsel at
its own expense and to participate in the defense thereof. If the Indemnifying
Parties elect (and are entitled) to assume the defense of such Third Party
Claim, (i) no compromise or settlement thereof or consent to any admission
or the entry of any judgment with respect to such Third Party Claim may be
effected by the Indemnifying Parties without the Indemnified Party's written
consent (which shall not be unreasonably withheld, conditioned or delayed)
unless the sole relief provided is monetary damages that are paid in full by the
Indemnifying Parties (and no injunctive or other equitable relief is imposed
upon the Indemnified Party) and there is an unconditional provision whereby each
plaintiff or claimant in such Third Party Claim releases the Indemnified Party
from all liability with respect thereto and (ii) the Indemnified Party
shall have no liability with respect to any compromise or settlement thereof
effected without its written consent (which shall not be unreasonably withheld).
If the Indemnifying Parties elect not to assume the defense of such Third Party
Claim (or fails to give notice to the Indemnified Party during the Notice
Period), the Indemnified Party shall be entitled to assume the defense of such
Third Party Claim with counsel of its own choice, at the expense and for the
account of the Indemnifying Parties; provided, however, that the Indemnified
Party shall make no settlement, compromise, admission, or acknowledgment that
would give rise to liability on the part of any of the Indemnifying Parties
without the prior written consent of such Indemnifying Parties, which consent
shall not be unreasonably withheld, conditioned or delayed.


55
of 55


(b)         Notwithstanding the
foregoing, the Indemnifying Parties shall not be entitled to control (but shall
be entitled to participate at its own expense in the defense of), and the
Indemnified Party shall be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any Third Party Claim
(i) at the reasonable expense of the Indemnifying Parties, as to which the
Indemnifying Parties fail to assume the defense during the Notice Period after
the Indemnified Party gives notice thereof to the Indemnifying Parties or
(ii) at the reasonable expense of the Indemnifying Parties, to the extent
the Third Party Claim seeks an order, injunction, or other equitable relief
against the Indemnified Party which, if successful, could materially adversely
affect the business, condition (financial or other), capitalization, assets,
liabilities, results of operations or prospects of the Indemnified Party. The
Indemnified Party shall make no settlement, compromise, admission, or
acknowledgment that would give rise to liability on the part of the Indemnifying
Parties without the prior written consent of the Indemnifying Parties (which
consent shall not be unreasonably withheld, conditioned or
delayed).





4.           Tax
Treatment of Indemnification Payments.  All indemnification
payments pursuant to thisAgreementshall be treated as adjustments to
the Purchase Price (as defined in the PSA).




5.           Counterparts.
 This Agreement may be executed and delivered (including by facsimile
transmission) in counterparts, each of which shall be deemed an original
instrument, but all such counterparts together shall constitute but one
agreement.





6.           Notice.  All
notices which are required or may be given pursuant to this Agreement shall be
sufficient in all respects if given in writing and delivered personally, by
telecopy or by registered or certified mail, postage prepaid, as
follows:





If
      to Indemnifying Parties:
            
            c/o
      Merit Energy Company, LLC
              13727
      Noel Road, Ste. 500
              Dallas,
      Texas 75240
              Attention:  Christopher
      S Hagge
              Telephone:  972-701-8377
              Facsimile:  972-628-1948
              
              and
              Attention:
      Jason Lindmark
              Telephone:
      972-701-8377
              Facsimile:
      972-628-1881If
      to Indemnified Party:
            
            ________________________
              ________________________
              ________________________
              ________________________




Any party
may change its address for notice by notice to the other in the manner set forth
above. All notices shall be deemed to have been duly given at the time of
receipt by the party to which such notice is addressed.


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7.           Governing
Law and Venue.  THIS AGREEMENT AND THE LEGAL RELATIONS BETWEEN
THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS OTHERWISE
APPLICABLE TO SUCH DETERMINATIONS. JURISDICTION AND VENUE WITH RESPECT TO ANY
DISPUTES ARISING HEREUNDER SHALL BE PROPER ONLY IN HARRIS COUNTY,
TEXAS.




8.           Captions.  The
captions in this Agreement are for convenience only and shall not be considered
a part of or affect the construction or interpretation of any provision of this
Agreement.




9.           Waivers.  Any
failure by any party or parties to comply with any of its or their obligations,
agreements or conditions herein contained may be waived in writing, but not in
any other manner, by the party or parties to whom such compliance is owed. No
waiver of, or consent to a change in, any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of, or consent to a change in,
other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.




10.         Assignment.  No
party to this Agreement shall assign all or any part of this Agreement, nor
shall any party assign or delegate any of its rights or duties hereunder,
without the prior written consent of the other parties. Notwithstanding the
preceding, however, either of the Indemnifying Parties may, without the
Indemnified Party’s consent, assign its rights and duties hereunder to a
successor to all or substantially all of such Indemnifying Party’s business or
assets.  This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted
assigns.




11.         Amendment.




(a)   This
Agreement may be amended or modified only by an agreement in writing executed by
the parties hereto.




(b)   No
waiver of any right under this Agreement shall be binding unless executed in
writing by the party to be bound thereby.





12.        No
Third-Party Beneficiaries.  Nothing in this Agreement shall
entitle any Person (as defined in the PSA) other than the parties to this
Agreement to any benefit, claims, remedy or right of any kind.




13.         Construction.  Each
of the parties to this Agreement has had substantial input into the drafting and
preparation of this Agreement and has had the opportunity to exercise business
discretion in relation to the negotiation of the details of the transactions
contemplated hereby. This Agreement is the result of arm's-length negotiations
from equal bargaining positions. In the event of a dispute over the meaning or
application of this Agreement, it shall be construed fairly and reasonably and
neither more strongly for nor against any party.





14.         Severability.  If
any term or other provisions of this Agreement is held invalid, illegal or
incapable of being enforced under any rule of law, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or


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legal
substance of the transactions contemplated hereby is not affected in a
materially adverse manner with respect to any party; provided, however, that if
any such term or provision may be made enforceable by limitation thereof, then
such term or provision shall be deemed to be so limited and shall be enforceable
to the maximum extent permitted by applicable Law (as defined in the
PSA).











[SIGNATURE
PAGE FOLLOWS.]


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IN
WITNESS WHEREOF, this Agreement has been signed by each of the parties hereto on
the date first above written.





“INDEMNIFYING
PARTIES”





[Applicable
Merit Partnerships]





By:


Name:


Title:











“INDEMNIFIED
PARTY”





[_____________________]








By:
_______________________


Name:
____________________


Title:
______________________














[TO ADD:
EXHIBIT A - SUBJECT TITLE DEFECTS AND AMOUNTS]





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EXHIBIT
D





Attached
to That Certain


Purchase
and Sale Agreement


By and
Between





MERIT
MANAGEMENT PARTNERS I, L.P., MERIT ENERGY PARTNERS III, L.P., AND MERIT ENERGY
PARTNERS D-III, L.P., as SELLER,


and


LINN
ENERGY HOLDINGS, LLC, as PURCHASER








TRANSITION
SERVICES AGREEMENT





This
Transition Services Agreement ("Agreement") is made and entered into as of this
day of October __, 2009, by and between MERIT ENERGY COMPANY, LLC (hereinafter
“MEC”) and LINN ENERGY HOLDINGS, LLC (hereinafter "Owner").





WITNESSETH:





WHEREAS,
Owner, as purchaser, and certain affiliates of MEC, as seller (“Seller”), have
entered into that certain Purchase & Sale Agreement dated November ___ ,
2009 (the "Asset Purchase Agreement"), pursuant to which Owner will acquire from
certain affiliates of Seller certain Assets (as defined in the Asset Purchase
Agreement); and





WHEREAS,
in order to provide for an efficient transfer of operations from Seller to Owner
following Closing, Owner desires to obtain services from MEC to assist Owner in
the operation of the Assets during the term of this Agreement; and





WHEREAS,
MEC is agreeable to providing such services pursuant to the terms
hereof;





NOW,
THEREFORE, in consideration of the premises, mutual covenants and agreements
herein contained, Seller, MEC and Owner (sometimes referred to collectively
herein as "Parties") agree as follows:





1.           Services





From the
Closing Date (as defined in the Asset Purchase Agreement) to the Termination
Date as defined in Section 7 below, MEC will provide such services to Owner
concerning the Assets as more fully described on Exhibit A, “Scope of Work”
attached hereto (the “Services”), as Owner may from time to time
request.





2.           Employment
Status





All
persons providing services on behalf of MEC under this Agreement shall remain
employees of MEC or one of its affiliates and each shall continue to be paid by
and to enjoy the benefits to which he is entitled as an employee of MEC or one
of its affiliates and shall not be an agent or employee of Owner. Each such
employee shall not be required by this agreement to work more than his or her
regular shift.





3.           Compensation


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For
Services rendered from the Closing Date to the Termination Date, Owner shall pay
MEC a fee of $_______________ per month which shall be pro-rated for any portion
of a month, and shall reimburse MEC for all third party expenses and for MEC's
actual costs of preparing any report or information not routinely generated by
MEC or its Affiliates.





4.           Independent
Contractor Status





Nothing
contained in this Agreement shall make either party hereto the agent of the
other party for any purpose. MEC and each employee of Seller or its affiliates
performing services hereunder shall be engaged hereunder in a capacity as an
independent contractor with full control over the manner and method of
performance.





5.           Standard
of Care





While
performing the services hereunder, MEC and its employees shall perform their
duties in a manner they reasonably believe to be in the best interests of Owner,
BUT SHALL HAVE NO LIABILITY WHATSOEVER TO PURCHASER FOR ANY DAMAGES, LIABILITIES
OR CLAIMS ARISING OUT OF OR RELATED TO THE PERFORMANCE OF SERVICES HEREUNDER,
INCLUDING DAMAGES CAUSED BY NEGLIGENCE OR FAULT OF MEC OR ITS AFFILIATES OR
THEIR EMPLOYEES OR UNDER CIRCUMSTANCES THAT WOULD CREATE STRICT LIABILITY OF MEC
OR SELLER TO PURCHASER, EXCEPT SUCH AS ARE CAUSED BY THEIR GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT IN THE PERFORMANCE OF THE SERVICES HEREUNDER.





6.           Indemnity





TO THE
MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, OWNER SHALL INDEMNIFY, DEFEND AND
HOLD HARMLESS SELLER, MEC, THEIR AFFILIATES, AND THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, CONTRACTORS AND SUBCONTRACTORS ("MEC INDEMNIFIED
PARTIES") FROM AND AGAINST ANY AND ALL CLAIMS COSTS OR LIABILITIES OF ANY KIND
OR NATURE WHATSOEVER ("CLAIMS"), ARISING OUT OF ANY ACTS OR OMISSIONS OF THE MEC
INDEMNIFIED PARTIES IN THE PERFORMANCE OF THE SERVICES HEREUNDER. THE FOREGOING
OBLIGATIONS OF INDEMNITY SHALL APPLY EVEN THOUGH SUCH CLAIMS MAY HAVE BEEN
CONTRIBUTED TO OR CAUSED BY THE NEGLIGENCE OR FAULT, OR THE STRICT OR STATUTORY
LIABILITY OF THE MEC INDEMNIFIED PARTIES UNDER ANY LAW (INCLUDING STATUTORY,
REGULATORY AND CASE LAW), EXCEPT FOR THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OF THE MEC INDEMNIFIED PARTIES.





Nothing
contained in this Agreement shall be deemed to relieve either the owners or
management of Owner from the performance of their respective duties or limit the
exercise of their powers and authority under the law.





7.           Term.





This
Agreement, upon execution hereof, shall be effective as of
_____________,


2009, and
shall continue in effect until 11:59 p.m. central time _______________, 20__ (the


"Termination
Date").





[Signature
page follows]


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IN
WITNESS WHEREOF, the Parties have executed this Agreement as of the date first
written above.








“MEC”





MERIT
ENERGY COMPANY, LLC





By:


Name:


Title:








“SELLER”





[Applicable
Merit Partnerships]








OWNER





[__________________________]





By:
 Name:
 Title:


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FIRPTA
AFFIDAVIT











Section
1445 of the Internal Revenue Code provides that a transferee (buyer) of a U.S.
real property interest must withhold tax if the transferor (seller) is a foreign
person.





To inform
the transferee (buyer) that withholding of tax is not required upon disposition
of U.S. real property of even date herewith (the “Property”) by Merit Management
Partners I, L.P, Merit Energy Partners III, L.P., and Merit Energy Partners
D-III, L.P., each a Delaware limited partnership (each a “Transferor”), the
undersigned hereby certifies the following on behalf of Transferor:





1.
            Transferor
      is not a foreign corporation, foreign partnership, foreign trust, or
      foreign estate (as those terms are defined in the Internal Revenue Code
      and applicable regulations).





2.
            No
      Transferor is a disregarded entity as defined in Treasury Regulation
      Section 1.1145-2(b)(2)(iii), other than each of Merit Management Partners
      I, L.P., Merit Management Partners II, L.P., and Merit Management Partners
      III, L.P., each of which is wholly owned, directly and indirectly, by
      Merit Energy Company, LLC, a Delaware limited liability
      company  (EIN 75-2280562) which is not a foreign corporation,
      foreign partnership, foreign trust or foreign estate (as those terms are
      defined in the Internal Revenue Code and applicable
      regulations).








3.
            Transferor’s
      federal identification number are:




Merit
      Management Partners I, L.P.
              75-2280562Merit
      Management Partners II, L.P.
              75-2280562Merit
      Management Partners III, L.P.
              75-2280562Merit
      Energy Partners III, L.P.
              75-2339519Merit
      Energy Partners D-III, L.P.
              75-2923653Merit
      Energy Partners E-III, L.P.
              20-1535870Merit
      Energy Partners F-III, L.P.
              20-2443414


4.
            Transferor’s
      mailing address is 13727 Noel Road, Ste. 500, Dallas, Texas
      75240.





The
undersigned understands that this certification may be disclosed to the Internal
Revenue Service by the transferee and that any false statement contained herein
could be punished by fine, imprisonment, or both.





UNDER PENALTIES OF PERJURY the
undersigned declares that he has examined this certification and to the best of
its knowledge and belief it is true, correct and complete and he does further
declare that he has authority to sign this document on behalf of
Transferor.





MERIT
      MANAGEMENT PARTNERS I, L.P.


MERIT
MANAGEMENT PARTNERS II, L.P


MERIT
MANAGEMENT PARTNERS III, L.P


MERIT
ENERGY PARTNERS III, L.P.





By:           Merit
Management Partners GP, LLC


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By:


Christopher
S. Hagge,


Assistant
Secretary








MERIT
ENERGY PARTNERS D-III, L.P.





By:          Merit
Management Partners I, L.P.,


general
partner





By:           Merit
Management Partners GP, LLC





By:


Christopher
S. Hagge,


Assistant
Secretary





MERIT
ENERGY PARTNERS E-III, L.P.





By:           Merit
Management Partners II, L.P.,


general
partner





By:           Merit
Management Partners GP, LLC





By:


Christopher
S. Hagge,


Assistant
Secretary








MERIT
ENERGY PARTNERS F-III, L.P.





By:           Merit
Management Partners III, L.P.,


general
partner





By:           Merit
Management Partners GP, LLC





By:


Christopher
S. Hagge,


Assistant
Secretary